Frontrunning: March 5

  • As ZH has been saying for months... Draghi Will Need to Push the Euro Down Some More (WSJ) ... but careful with "redenomination risk"
  • Senate Report Said to Fault JPMorgan (NYT)
  • EU Opens Way for Easier Budgets After Backlash (BBG)
  • China Moves to Temper Growth - Property Bubble Is a Key Concern (WSJ)
  • China bets on consumer-led growth to cure social ills (Reuters)
  • Italian president mulls new technocrat government (Reuters)
  • Grillo says MPS won't back technocrats (ANSA)
  • The Russians will be angry: Euro Chiefs Won’t Rule Out Cyprus Depositor Losses (BBG)
  • China Bankers Earn Less Than New York Peers as Pay Dives (BBG)
  • Investors click out of Apple into Google (FT)
  • Community colleges' cash crunch threatens Obama's retraining plan (Reuters)
  • Alwaleed challenges Forbes over his billions - Calculation of $20bn net worth is flawed, says Saudi prince (FT)
  • Guy Hands Dips Into Own Pockets to Fund Bonuses at Terra Firma (BBG)
  • North Korea to scrap armistice if South and U.S. continue drills (Reuters)


Overnight Media Digest


* Switzerland's oldest bank Wegelin & Co was ordered to pay a total of $74 million to the U.S. government in the first-ever criminal sentence for a foreign bank accused of violating U.S. tax laws.

* William Johnson, chief executive of H.J. Heinz Co, could walk away from the ketchup giant with more than $200 million if he leaves when its new owners take control.

* The regulator overseeing Fannie Mae and Freddie Mac announced Monday one of the most concrete efforts to date for building a new infrastructure that could ultimately replace the government-controlled mortgage companies.

* China set a growth target of around 7.5 percent for this year as it kicked off a meeting to finalize its leadership transition, reflecting how Beijing is turning away from breakneck growth based on exports in favor of a broader economy driven by spending at home.

* Bruce Karpati, a top Securities and Exchange Commission lawyer who oversees enforcement of hedge funds and mutual funds, is in talks to leave the regulator for a fund-compliance job with Prudential Financial Inc, the insurance and asset-management firm, according to people with knowledge of the discussions.

* Royal Dutch Shell Plc will build plants in Louisiana, America and Canada to produce liquefied natural gas as a fuel for heavy trucks and large ships, the company said Tuesday.

* Cyprus's newly elected government is bargaining for a 17 billion euro ($22 billion) bailout from its euro-zone peers. But the little island won't get a cent until it wrestles with a long-standing issue: money laundering.

* Nigeria's oil industry is at a crisis point because the theft of oil from pipelines and the pollution it causes are reaching intolerable levels, costing the country and oil companies billions of dollars a year, the head of Royal Dutch Shell Plc's Nigerian operations said.

* The chief of Boeing Co's commercial unit says the return of its flagship 787 Dreamliner to service hinges on U.S. Federal Aviation Administration approval of the plane maker's proposal to modify the jet's errant lithium-ion batteries.

* General Motors Co's decision to quash a sale of its Adam Opel AG unit three years ago and keep the ailing business was correct, Vice Chairman Stephen Girsky said Monday. Girsky also said a turnaround plan at Opel, which caused most of GM's $1.8 billion loss in Europe in 2012, is beginning to make progress.

* Marriott International Inc on Tuesday is expected to unveil its designs for Moxy, a new hotel brand it is developing with a subsidiary of Inter IKEA Group, the parent company of the IKEA furniture brand.



The Financial Services Authority is set to crack down on asset managers using investors' money to pay for access to chief executives.

The City's big banks are weighing a lawsuit against the EU over rules to cap bonuses.

Vince Cable has called for a review of the government's funding for lending scheme after the initiative failed to prevent a slump in lending during the final quarter of last year.

Ray Conner, the head of Boeing Co's commercial aircraft business, backed the company's decision to stick with a controversial new battery type for the 787 Dreamliner.

HSBC has all but ruled out moving its headquarters to Hong Kong despite the threat of new European bonus restrictions.



* While a trader known as the "London whale" has come to represent a multibillion-dollar blowup at JP Morgan Chase & Co , U.S. Congressional investigators have discovered that the problems involved more senior levels of the nation's largest bank.

* H.J. Heinz Co disclosed late on Monday that William Johnson, its chief executive of 15 years, could stand to make nearly $213 million if Heinz's new owners decide to show him the door.

* British finance minister George Osborne is expected Tuesday to urge his European Union counterparts to water down proposed rules restricting the size of bankers' bonuses. Many in the UK government and the financial industry worry that mandated limit to bonuses could make it harder for London to compete in international banking circles.

* Fannie Mae and Freddie Mac will form a new joint company for securitizing home loans as a steppingstone toward reducing government involvement in the mortgage market, the regulator of the U.S. government-controlled companies said on Monday.

* Bond insurer MBIA Inc on Monday won the dismissal of a lawsuit by the Bank of America Corp and Societe Generale that challenged its 2009 restructuring.

* The Italian energy giant Eni SpA began Monday to restart operations of the trans-Mediterranean natural gas pipeline it closed Saturday after fighting between two Libyan militias threatened its gas complex west of Tripoli.

* Hess Corp announced on Monday a plan to sell off its retail and refining operations and focus primarily on oil production. The streamlining comes as it seeks to fight off an activist investor, hedge fund Elliott Management, which said that the oil company's plans did not go far enough to address management problems.

* Haruhiko Kuroda, the nominee to become the next Bank of Japan governor, said Monday that he would do "whatever is needed" to finally end deflation in the world's third-largest economy.

* Gyorgy Matolcsy, the new governor of Hungary's central bank, tightened his grip on power during his first day in office Monday, issuing new rules that curb the powers of the bank's deputy governors.

* Mexican glass maker Vitro SAB de CV said Monday that it had reached an agreement with bondholders, ending a dispute among powerful financiers that had ricocheted between Mexican and American courts.

* Monster Beverage Corp defended its energy drinks on Monday against a lawsuit accusing them of being responsible for the death of a 14-year-old girl, arguing that no blood test had been performed to confirm that she died of caffeine toxicity.




* Canada's Natural Resources Minister Joes Oliver and Saskatchewan Premier Brad Wall each take to the road this week to woo American lawmakers and industry leaders as TransCanada Corp's proposed Keystone XL pipeline remains under the U.S. government consideration.

* The federal Liberals are weeding out duplicate names and mischief makers as they count the Canadians who are eligible to vote for their new leader, but party sources say the final number will approach 300,000, far more than the 128,000 members that the New Democrats had on their lists last year when Thomas Mulcair was elected to lead that party.

* British Columbia Premier Christy Clark offered up a second resignation on Monday for a plan to use public resources to prop up her Liberal Party's electoral fortunes, saying she will take responsibility for an ethnic voter strategy developed with input from key members of her staff.

Reports in the business section:

* Bell Media Inc has agreed to sell some of Canada's most popular specialty TV networks to smooth the way for a C$3 billion ($2.92 billion) acquisition of Astral Media Inc , including its share in six channels that Corus Entertainment Inc will buy to solidify its position as the dominant provider of children's TV.

* Canada's housing market may still be cooling, but there are fears in some quarters that "bubble fatigue" will pump it back up heading into the spring season. Home buyers are skeptical about whether the residential real estate market is heading for a sharp price and sales drop. At the same time, mortgage rates are declining, not rising.

* Toronto Star, Canada's largest newspaper, is cutting 55 jobs, or about 9 percent of its workforce, from its newsroom, outsourcing editing duties that are increasingly seen as too costly for cash-strapped dailies trying to cope with falling advertising revenue.


* The Harper government is once again engaged in a war of words with a United Nations agency. Canada can't credibly preach human rights on the international stage when too many of its own citizens are going hungry, the UN's right-to-food envoy, Olivier De Schutter, told The Canadian Press in an interview.

* Bear spray wielding thieves stormed into a Vancouver Apple Inc store just before closing on Monday, and hit about 40 people with the caustic spray before making off with an unknown quantity of iPods, iPads and laptops.


* CIBC World Markets Inc said on Monday that the Canadian economy should pick up speed in the first three months of this year, with growth of 2 percent compared with 0.6 percent in the final quarter of 2012. That should be followed by 2.3 percent between April and June, before easing to 1.9 percent the following quarter and ending with another 2.3 percent spurt in the last three months.




-- Regulatory rules on home price controls in China will be released before the end of March, according to housing minister, Jiang Weixin.

-- Supervision of food and pharmaceutical safety will be strengthened to alleviate public concerns over the sectors, said Health Minister Chen Zhu.


-- Japan has failed to engage in productive negotiations with China over the disputed islands and has through its actions invalidated the basis for China's restraint, said Fu Ying, the spokeswoman for the National People's Congress.


-- The People's Daily published an editorial on Tuesday calling on the nation to deepen reforms and further develop the economy to build China into a powerful country.


Fly On The Wall 7:00 AM Market Snapshot



Apollo Group (APOL) upgraded to Hold from Sell at Deutsche Bank
EV Energy (EVEP) upgraded to Outperform from Neutral at Credit Suisse
MGIC Investment (MTG) upgraded to Overweight from Underweight at Barclays
MicroStrategy (MSTR) upgraded to Outperform from Market Perform at FBR Capital
PT Indosat (IIT) upgraded to Neutral from Sell at Citigroup
Radian Group (RDN) upgraded to Overweight from Underweight at Barclays
Seadrill (SDRL) upgraded to Overweight from Neutral at HSBC


AmerisourceBergen (ABC) downgraded to Buy from Strong Buy at ISI Group
Casella Waste (CWST) downgraded to Market Perform from Strong Buy at Raymond James
Cliffs Natural (CLF) downgraded to Market Perform from Outperform at BMO Capital
Impax (IPXL) downgraded to Hold from Buy at Canaccord
Impax (IPXL) downgraded to Market Perform from Outperform at Leerink
Standard Motor Products (SMP) downgraded to Hold from Buy at BB&T
THL Credit (TCRD) downgraded to Market Perform from Outperform at Keefe Bruyette


AG Mortgage (MITT) initiated with a Neutral at Credit Suisse
Acuity Brands (AYI) initiated with a Buy at UBS
Aegerion (AEGR) initiated with a Buy at BofA/Merrill
Anthera Pharmaceuticals (ANTH) initiated with a Buy at Jefferies
Credit Acceptance (CACC) initiated with an Outperform at JMP Securities
Diana Shipping (DSX) initiated with a Neutral at JPMorgan
Dyax (DYAX) initiated with a Buy at Jefferies
E2open (EOPN) initiated with a Buy at Benchmark Co.
Health Insurance Innovations (HIIQ) initiated with an Outperform at Credit Suisse
Intuitive Surgical (ISRG) initiated with an Underperform at Northland Securities
Netflix (NFLX) initiated with an Outperform at RBC Capital
New Source Energy (NSLP) initiated with an Outperform at RW Baird
Sarepta (SRPT) initiated with an Outperform at Leerink
Supernus Pharmaceuticals (SUPN) initiated with a Buy at Jefferies
ZAIS Financial (ZFC) initiated with a Buy at Citigroup, initiated with an Outperform at Credit Suisse and initiated with an Overweight at Barclays


AMR (AAMRQ), US Airways (LCC) received second DOJ request for more information regarding proposed merger
Lockheed (LMT) beat Raytheon (RTN), Boeing (BA) to retain Aegis systems work, Bloomberg reports
Microsoft (MSFT) acquired MetricsHub, terms not disclosed
Starwood (HOT) to open 50 new hotels in Europe in five years, invest $200M in Luxury Collection
American Apparel (APP) sees FY13 adjusted EBITDA $47M-$54M
Fitch upgraded Pioneer Natural (PXD) to “BBB-”, outlook revised to stable
FDA issued second complete response letter for XARELTO (JNJ)
Checkpoint Systems (CKP) to sell U.S. and Canadian CheckView business
Brunswick (BC) to consolidate its yacht/motor yacht production at Palm Coast plant


Companies that beat consensus earnings expectations last night and today include:
Golden Star Resources (GSS), Sun Hydraulics (SNHY), Park-Ohio (PKOH), ABM (ABM), Casella Waste (CWST), Santarus (SNTS), Ascena Retail (ASNA)

Companies that missed consensus earnings expectations include:
Memorial Production (MEMP), Alon USA Partners (ALDW), Quad/Graphics (QUAD), Ducommun (DCO)

Companies that matched consensus earnings expectations include:
Epiq Systems (EPIQ), Shuffle Entertainment (SHFL), Nautilus (NLS)


  • Today’s ISM non-manufacturing report may provide a key all-clear for the U.S. economy. The headline index is seen barely changed at 55. But last month saw its most forward-looking component, the new-orders index, slip to 54.4 from 58.3, the weakest reading since April. After 41 months in a row in expansion territory, another sharp drop would be an ominous sign right now, the Wall Street Journal reports
  • Americans should be able to take their used cellphones and tablets freely from one wireless carrier to another (T, S, VZ, VOD) if they aren't under contract, the Obama administration says, the latest victory to Internet activists seeking to shape U.S. technology policy, the Wall Street Journal reports
  • Japan's aviation regulators said there are still "several steps" required before any battery fix for Boeing’s (BA) troubled 787 Dreamliner jet can be approved, Reuters reports
  • Toyota Motor (TM) plans to soon reshuffle its top executives, sources say, as President Akio Toyoda attempts to dismantle a regimented decision making hierarchy at the automaker, Reuters reports
  • Consumers in the U.S. spent about $782.5B for recreational goods, vehicles and services in January on a seasonally-adjusted annualized basis, representing 6.9% of total personal consumption, based on data from the Commerce Department. In the three years before the recession, the average was 7.4%, Bloomberg reports
  • California gained a positive credit outlook following a voter-backed tax boost, an improving economy and previous budget cuts that helped to stabilize its finances after years of shortfalls, Fitch Ratings said, Bloomberg reports


Brookfield (BAM) to offer 8.07M L.P. units
Del Frisco's (DFRG) announces sale of 4.75M shares of common stock for holders
First Industrial Realty (FR) announces 8.4M share common stock offering
J.C. Penney (JCP) 10M share Block Trade; price range $16.40-$16.60
Jazz Pharmaceuticals (JAZZ) offers 5.38M ordinary shares by selling shareholders
MRC Global (MRC) announces 17M share secondary offering of stock by stockholder and files automatic common stock offering
Trulia (TRLA) files to sell $100M in common stock
Williams Partners (WPZ) offers 10M common units, private placement of 3M common units


Brigade Capital Management reports 5.4% passive stake in Ferro (FOE)
Deutsche Balaton Aktiengesellschaft reports 9.96% passive stake in Gentherm (THRM)
Endicott reports 9.9% stake in NewBridge Bancorp (NBBC)
FrontFour Capital Group reports 5.1% stake in Fisher Communications (FSCI), urges company to seek strategic alternatives and work towards sale
Quinpario Partners reports 4.2% stake in Zoltek (ZOLT), looks to remove board members
Thomas Milton Duff reports 5.84% stake in Frozen Food Express (FFEX)


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