Frontrunning: May 3

  • U.S. Bulks Up to Combat Iran (WSJ)
  • Taking sides in Syria is hard choice for Israel (Reuters)
  • Europe full retard: Italian coalition aims to join eurozone’s ‘virtuous’ deficit club (FT)
  • G-7 Governments Not Playing Favorites as Central Banks Revamped (BBG)
  • Gold Traders Most Bearish in Three Years After Drop (BBG)
  • It's a Hard Job Predicting Payrolls Number  (WSJ)
  • EU economies to breach deficit limits as economic picture darkens (FT)
  • IBM Says U.S. Justice Investigating Bribery Allegations (BBG)
  • At Texas fertilizer plant, a history of theft, tampering (Reuters)
  • SAC Sets Plan to Dock Pay in Cases of Wrongdoing (WSJ) - "in case of"?
  • EU to propose duties on Chinese solar panels (Reuters)
  • Billionaire Kaiser Exploiting Charity Loophole With Boats (BBG)
  • SEC Zeroing In on 'Prime' Funds (WSJ)
  • Apple Avoids $9.2 Billion in Taxes With Debt Deal (BBG)
  • China April official services PMI at 54.5 vs 55.6 in March (Reuters)


Overnight Media Digest


* The Consumer Financial Protection Bureau has issued subpoenas to U.S. auto lenders over the sale of extended warranties and other financial products.

* The Pentagon has redesigned its biggest "bunker buster" bomb with more advanced features intended to enable it to destroy Iran's most heavily fortified and defended nuclear site.

* In comments that appear aimed at pressuring Vodafone to sell its stake in the companies' U.S. joint venture, Verizon's CEO hinted that Verizon Wireless might not pay a distribution to its two owners this year.

* Senator Charles Grassley is expanding his investigation into how investors got advance word of a market-moving Medicare policy decision.

* A year ago, James Dimon was the king of Wall Street. Now, the chairman and chief executive of JPMorgan Chase is grappling with a thicket of problems that threaten to hamstring the nation's largest bank for years.

* Book retailer Barnes & Noble is adding Google's apps and online services including gmail to its Nook HD tablets in an effort to boost sales and match rivals such as Amazon's Kindle Fire tablet.

* As Glencore Xstrata shares start trading Friday, CEO Ivan Glasenberg's focus is on integrating the two firms, squeezing out every ounce of profit, and watching for the next deal.



A court heard on Thursday that HM Revenue & Customs and Goldman Sachs Group agreed to a "sweetheart" tax deal in 2010 -- waiving interest on up to 20 million pounds ($31.02 million)of offshore bonuses for the bank's staff -- partly to spare UK Finance Minister George Osborne "major embarrassment".

In the wake of Royal Dutch Shell Chief Executive Peter Voser's resignation on Thursday, three senior executives have been singled out to take his place at the helm.

Twitter Inc has appointed Cynthia Gaylor -- a Morgan Stanley investment banker who has worked with Facebook, LinkedIn and Zynga -- as its new head of corporate development, encouraging rumours that it is poised for an initial public offering.

Intel Corp, the world's largest chipmaker, chose veteran insider Brian Krzanich as its new chief executive to succeed Paul Otellini later this month.

Singapore state investor Temasek Holdings is preparing to buy a $500 million stake in British financial data provider Markit, according to two people familiar with the matter.

David Cooksey, Kazakh miner Eurasian Natural Resources Corp's chairman during its London floatation, quit in 2009 following a spat with major shareholders, according to people close to the matter.



* A day after the Walt Disney Company disclosed that it was ending apparel production in Bangladesh, that country's garment manufacturers expressed alarm that other Western corporations might follow Disney's lead. They feared that could bring about a potential mass exodus that would devastate Bangladesh's economy and threaten the livelihoods of millions of people.

* Steven Cohen, the founder of the hedge fund SAC Capital Advisors, announced a broad set of changes that would bolster the fund's compliance practices, including clawing back the pay of employees who violate the law, in a letter to his investors on Thursday.

* Government investigators have found that JPMorgan Chase devised "manipulative schemes" that transformed "money-losing power plants into powerful profit centers," and that one of its most senior executives gave "false and misleading statements" under oath.

* Thousands of workers at the health care giant Kaiser Permanente have voted again to remain with the Service Employees International Union rather than switch to a smaller rival, the National Labor Relations Board said on Thursday.

* The European Central Bank cut its benchmark interest rate to a record low on Thursday. But its president, Mario Draghi, indicated that his promise last year to do "whatever it takes" to save the euro had limits.

* Barnes & Noble, in an effort to strengthen the digital offerings of its Nook devices, will outfit its color tablets with Google Play, the one stop shop for Google's applications and software services, the bookseller said on Thursday.




* Ontario Premier Kathleen Wynne has tabled a budget aimed at giving her time to improve the sagging fortunes of her party and the province's sputtering economy. The C$127.6 billion ($126.54 billion) plan walks a fine line between gradually bringing down Ontario's deficit while implementing the Liberal Leader's "fair society" package of social legislation.

* A former citizenship judge and Toronto police auxiliary volunteer, Philip Gaynor, has been arrested on allegations that he supplied copies of the citizenship exam to two immigration consultants in the greater Toronto area.

Reports in the business section:

* Loblaw Cos executive chairman Galen Weston says the purveyor of Joe Fresh is embarking on a new program to improve worker safety in Bangladesh, but his competitors in the retail industry have so far shown a "deafening silence" in the wake of last week's deadly building collapse.

* Nigeria's trade minister says he hopes a new investment protection treaty with Canada will help double trade between the two countries by 2015 -- but particularly outside the African nation's dominant oil industry.


* The final sections of a 125 meter spire were hoisted to the top of One World Trade Center on Thursday, signaling a close to the saga between the New York development team and a Quebec steel manufacturer that once threatened to bring the whole operation to a halt.

* The Ontario NDP on Thursday blasted the Liberal government's 2013 budget proposal to introduce high-occupancy toll lanes on some Greater Toronto highways, saying it would effectively create "Lexus lanes" on provincial roads.


* In its budget Thursday, Ontario's minority Liberal government proposed new powers for the Ontario Securities Commission with the intention of solidifying its role as Canada's de-facto national securities regulator.




-- The sovereign wealth funds of China and Russia are ready to double the size of their joint private equity fund this year to $4 billion to boost investment in the two countries, the head of Russia Direct Investment Fund said.

-- If the Chinese economy continues to slow and the impact spills into the labour market, policymakers may be pressured to put stabilising growth at the top of their agenda by sacrificing structural reform, the paper said in an editorial.


-- The United States has used the pretext of "state security" to interfere in U.S. investment by Chinese companies, threatening to politicise Chinese-U.S. economic relations, the paper said in a commentary.


-- Recent sharp appreciation in the Chinese currency yuan against the dollar, with a slew of record highs, may not sustain as it is propelled mainly by speculative hot money inflows into China due to large-scale quantitative easing by major Western central banks.

-- A regulatory clampdown on irregularities in the domestic bond market launched in April will effectively curb manipulation by some institutions in the market and will be a long-term positive factor China's capital markets.


-- Government departments headed by the National Development and Reform Commission, China's top economic planner, is expected to complete the planning for a new round of urbanisation in China by 2020.

-- Regulators may soon start approval for new quotas for the Renminbi Qualified Foreign Institutional Investors (RQFII), that allows overseas institutional investors to invest in China's domestic capital markets. Foreign institutions had used up the scheme's initial quota of 70 billion yuan ($11.4 billion) by January. Beijing has agreed to expand the total quota to 270 billion yuan but has not yet started to approve investment with the new quotas.


Corporate Finance

* The investors who own Kelda Group, the parent company of Yorkshire Water, are poised to put a 1.5 billion pound ($2.33 billion) stake in the company up for sale, Sky News reported, citing insiders familiar with the matter.

* Cnooc Ltd sold $4 billion of bonds on Thursday, the largest amount ever by a Chinese company. The deal attracted orders of $23.8 billion just 16 hours after it was announced, in the strongest demand for a bond sale in Asia, excluding Japan in recent years, people with direct knowledge of the matter said on Friday, according to the Wall Street Journal.

* Fang Fenglei, a former Goldman Sachs Group Inc banker and co-founder of Hopu Investment Management, is raising up to $2 billion in a new fund, people familiar with the matter said, as one of China's best known bankers seeks to add to his riches.

* Ares Management LLC, an investment firm with some $59 billion in credit and private equity assets, is speaking to investment banks about an initial public offering in the United States, a person with knowledge of the matter said on Thursday.

* Temasek, Singapore's sovereign wealth fund, is poised to take a stake worth around $500 million in Markit, the UK data provider that has become an influential force in financial markets in recent years, the Financial Times said citing two people familiar with the matter.

* Cia. Siderurgica Nacional SA, Brazil's third-largest steelmaker, has emerged as the leading bidder for ThyssenKrupp AG's Brazilian and U.S. steel-plant assets, Bloomberg reported, citing people with knowledge of the talks.


Fly on the Wall 7:00 AM Market Snapshot



Allstate (ALL) upgraded to Conviction Buy from Buy at Goldman
Auxilium (AUXL) upgraded to Equal Weight from Underweight at Morgan Stanley
Beam (BEAM) upgraded to Buy from Neutral at Citigroup
Beazer Homes (BZH) upgraded to Market Perform from Underperform at JMP Securities
Beazer Homes (BZH) upgraded to Overweight from Neutral at JPMorgan
Bruker (BRKR) upgraded to Buy from Neutral at Mizuho
comScore (SCOR) upgraded to Buy from Hold at Cantor
Gartner (IT) upgraded to Outperform from Neutral at RW Baird
Gildan Activewear (GIL) upgraded to Neutral from Sell at Citigroup
KAR Auction (KAR) upgraded to Buy from Hold at BB&T
Magellan Midstream (MMP) upgraded to Outperform from Neutral at Credit Suisse
National CineMedia (NCMI) upgraded to Overweight from Neutral at JPMorgan
Rowan Companies (RDC) upgraded to Buy from Hold at Jefferies
TTM Technologies (TTMI) upgraded to Buy from Neutral at Longbow
Tractor Supply (TSCO) upgraded to Outperform from Perform at Oppenheimer
Western Refining (WNR) upgraded to Outperform from Neutral at Credit Suisse


Alon USA Energy (ALJ) downgraded to Underperform from Neutral at Credit Suisse
Annaly Capital (NLY) downgraded to Equal Weight from Overweight at Evercore
Aveo Pharmaceuticals (AVEO) downgraded to Hold from Buy at Canaccord
Bed Bath & Beyond (BBBY) downgraded to Perform from Outperform at Oppenheimer
Bon-Ton Stores (BONT) downgraded to Hold from Buy at KeyBanc
C&J Energy (CJES) downgraded to Market Perform from Outperform at Wells Fargo
Delcath Systems (DCTH) downgraded to Sell from Buy at Roth Capital
Elizabeth Arden (RDEN) downgraded to Market Perform from Outperform at BMO Capital
Guidance Software (GUID) downgraded to Hold from Buy at Benchmark Co.
Landstar System (LSTR) downgraded to Sell from Neutral at Goldman
MercadoLibre (MELI) downgraded to Neutral from Buy at BofA/Merrill
PetSmart (PETM) downgraded to Perform from Outperform at Oppenheimer
RPX Corp. (RPXC) downgraded to Neutral from Overweight at JPMorgan
RealPage (RP) downgraded to Neutral from Outperform at Credit Suisse
RenaissanceRe (RNR) downgraded to Equal Weight from Overweight at Evercore
Sally Beauty (SBH) downgraded to Equal Weight from Overweight at Barclays
Solta Medical (SLTM) downgraded to Buy from Strong Buy at Ascendiant Capital
Sysco (SYY) downgraded to Sell from Hold at Cantor
Valero Energy (VLO) downgraded to Neutral from Outperform at Credit Suisse
Verisk Analytics (VRSK) downgraded to Market Perform from Outperform at Keefe Bruyette
Vocera (VCRA) downgraded to Market Perform from Outperform at Leerink
ZAGG (ZAGG) downgraded to Neutral from Buy at Roth Capital


ACE (ACE) acquired ABA Seguros from Ally Financial (GMA) for about $690M cash
Fortune Brands (FBHS) acquired WoodCrafters Home Products for $300M
Barnes & Noble (BKS) confirmed Google Play (GOOG) on NOOK HD and NOOK HD+
Duke Energy (DUK) suspended Harris nuclear plant expansion due to slower growth
Rent-A-Center (RCII) entered into agreement with Goldman Sachs (GS) for $200M repurchase plan
Newell Rubbermaid (NWL) to pursue sale of hardware and teach platform businesses


Companies that beat consensus earnings expectations last night and today include:
Pilgrim's Pride (PPC), comScore (SCOR), AIG (AIG), Fluor (FLR), Fortune Brands (FBHS), athenahealth (ATHN), Chicago Bridge & Iron (CBI), Hill International (HIL), LinkedIn (LNKD), Kraft Foods (KRFT)

Companies that missed consensus earnings expectations include:
Newcastle Investment (NCT), Eldorado Gold (EGO), Bill Barrett (BBG), Dun & Bradstreet (DNB), Health Management (HMA), Dole Food (DOLE), Clear Channel Outdoor (CCO), Gilead (GILD)

Companies that matched consensus earnings expectations include:
Citizens (CIA), Hain Celestial (HAIN), Autobytel (ABTL), Mylan (MYL), Standard Pacific (SPF)


  • Verizon Communications (VZ) CEO Lowell McAdam hinted in a meeting with investors that Verizon Wireless might not pay a distribution to its two owners this year, comments that appear aimed at pressuring Vodafone Group (VOD) to sell its stake in the companies' U.S. joint venture, the Wall Street Journal reports
  • Big banks (JPM, C, GS) are rushing to fill a capital hole dating back to the financial crisis with an instrument that appeals to investors hungry for income: companies have sold $13.6B of preferred shares in the U.S., the fastest clip since 2008, according to data provider Dealogic, the Wall Street Journal reports
  • Microsoft’s (MSFT) doesn’t like to call the new Nokia (NOK) Lumia 521 cheap, but the lower-priced smartphone launching in the U.S. is the company's boldest move yet to win mass market share from leaders Apple (AAPL) and Samsung Electronics (SSNLF), Reuters reports
  • A shareholder in OfficeMax (OMX) sued the company’s directors seeking to block its acquisition by Office Depot (ODP), calling the proposed $1.2B all-stock deal "grossly inadequate", Reuters reports
  • Apple (AAPL) avoided as much as $9.2B in taxes by financing part of a $55B stock buyback with debt rather than offshore cash that would have been billed by the U.S. government, Moody’s Investment Services estimates, Bloomberg reports
  • Berkshire Hathaway (BRK.A) Chairman Warren Buffett is planning an expansion in commercial insurance after hiring four executives from AIG (AIG). “We would like to get into the commercial-insurance business very big time,” Buffett said, Bloomberg reports


Central European Media (CETV) 54M share Secondary priced at $2.75
Harvest Capital Credit (HCAP) 3.4M share IPO priced at $15.00
LTC Properties (LTC) files to sell 3M shares of common stock
Macquarie Infrastructure (MIC) 6.15M share Secondary priced at $58.50
QIWI (QIWI) 12.5M share IPO priced at $17.00


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