Frontrunning: June 5

  • National Security Advisor Tom Donilon resigning, to be replaced by Susan Rice - Obama announcement to follow
  • Japan's Abe targets income gains in growth strategy (Reuters), Abe unveils ‘third arrow’ reforms (FT) - generates market laughter and stock crash
  • Amazon set to sell $800m in ads (FT) - personal tracking cookie data is valuable
  • 60 percent of Americans say the country is on the wrong track (BBG)  and yet have rarely been more optimistic
  • Jefferson County, Creditors Reach Deal to End Bankruptcy (BBG)
  • Turks clash with police despite deputy PM's apology (Reuters)
  • Rural US shrinks as young flee for the cities (FT)
  • Australia holds steady on rate but may ease later (MW)
  • The Wonk With the Ear of Chinese President Xi Jinping (WSJ)
  • Syrian army captures strategic border town of Qusair (Reuters)
  • Brazil slashes financial transactions tax (FT)
  • Sir Mervyn King signs off Bank accounts for last time (Telegraph)
  • Apple Import Ban on Old IPhones Stokes Samsung Patent War (BBG)
  • Europe April retail sales worse than forecast (Reuters)
  • Draghi Covets Bank Clean-Up as ECB Weighs Fix (BBG)
  • Syria's chemical weapons program was built to counter Israel (Reuters)
  • Amazon plans big expansion of online grocery business (Reuters)


Overnight Media Digest


* Samsung Electronics won a significant legal victory against Apple that threatens to halt the sale of some iPhones and iPads in the United States.

* Controversies surrounding the IRS and other government agencies have sown doubts about the Obama administration, but most people don't hold the president personally responsible for the actions, a new poll finds.

* The White House announced executive actions and policy recommendations aimed at preventing certain patent-holding firms, known as "patent trolls" to their detractors, from abusing the patent system and disrupting competition.

* The FHA's projected losses could reach as high as $115 billion over 30 years under a previously undisclosed stress test conducted last year.

* The fate of SAC Capital Advisors is a $1 billion question on Wall Street, as that figure is an estimate of how much the hedge fund generates annually in trading commissions, fees and other payouts to banks.

* Jefferson County leaders voted to approve a deal that would allow the Alabama county to emerge from the largest-ever municipal bankruptcy case. Hedge funds and private-equity groups stand to profit.

* Verizon Wireless will pay $1 billion for rights to air more NFL games over its customers' smartphones, betting big on changing viewer habits as Americans watch more of their favorite shows on screens other than TV



A trade body slapped an import ban on certain Apple Inc products in the United States after ruling that the Silicon Valley giant had infringed patents owned by Samsung Electronics.

Technology companies International Business Machines and Inc on Tuesday made cloud computing acquisitions worth a combined $4.5 billion, underscoring an industry shift towards cloud computing.

HSBC Holdings Plc is being sued by the state of New York for allegedly failing to initiate settlement talks with hundreds of struggling homeowners.

A draft report on banking standards shows that splitting the Royal Bank of Scotland into a "good bank" and a "bad bank" -- which will hold RBS's toxic assets -- has been suggested as an option.

As many as half of Eurasian Natural Resources Corp's minority shareholders are expected to vote against some of the resolutions at the miner's annual general meeting on Wednesday.

Luxury brand Hermes International SCA's soon-to-be chief executive, Axel Dumas, vowed to protect the company's independence from larger rival LVMH Moet Hennessy Louis Vuitton's "neither desired nor desirable" shareholding in Hermes.



* Led by Lei Jun, China's Xiaomi Technology, known for its popular and inexpensive smartphones, sold $2 billion in handsets in China last year, and he has carefully cultivated an image in the Steve Jobs mold.

* Jefferson County's $4.2 billion municipal bankruptcy is the largest such filing in the history of United States, and it is being closely watched for the precedent it might set.

* United States President Barack Obama, in a series of executive actions, asked the patent office to take steps to block frivolous lawsuits filed by so-called patent trolls.

* Seven months before the core provisions of President Obama's health care law are to take effect, most television advertising that mentions the law continues to come from its opponents.

* The glowing assessments of the Chinese poultry plant where more than 100 people were killed in a fiery explosion suggested government officials had missed problems.




* The man in charge of an external audit of Senator Pamela Wallin's expense claims says he hopes the review will be finished by the summer but cannot control how long auditors take to complete their work.

* The Ontario government has considered raising fees for everyone from drivers to police recruits to small business owners in an effort to scare up cash as it wrestles with a C$11.7 billion ($11.31 billion) deficit.

* A decision to ban turban-wearing Sikh kids from Quebec soccer fields was loudly condemned by the federal government.

Reports in the business section:

* Bombardier Inc kicked off a crucial month for its new C Series airplane by firming up a multibillion-dollar order and revealing the identity of a key Middle Eastern customer.

* Rogers Media will rename its recently acquired sports station "Sportsnet 360," and plans to position the channel formerly known as The Score as a 24-hour news service for hardcore sports fans who are just as interested in watching press conferences as they are in watching games.

* Greater Vancouver's real estate market is finally perking up after a 19-month slump. The Vancouver area's housing sales volume rose by 1 percent in May amid early signs that the region's property market could be slowly inching back.


* The steady drip, drip, drip of the Duffy affair has been like water torture for the Prime Minister during Question Period, despite his assurances Tuesday that he has been "very clear, very public and very consistent."

* A top forecaster says Canadians will likely have to get through topsy turvy weather in June before settling into fairly typical summer conditions across much of the country.


* All-sports television network The Score is getting a makeover. New owner Rogers Media says it will launch the revamped Sportsnet 360 on July 1. The network will have a new logo, sets, animation package and enhanced ticker.

* Bank of Montreal has reached a settlement in a 2010 lawsuit over an alleged C$70 million ($67.7 million) mortgage scam in Alberta. The bank had sued more than 100 people - including lawyers, mortgage brokers and staff - for allegedly participating in mortgage fraud that cost the bank about $30-million.




- Preparatory work for the resumption of the national bond futures market has been completed, said Zhang Shenfeng, chairman of China Financial Futures Exchange.

- Banks are encouraged to increase credit supply for small companies, said Shang Fulin, chairman of China Banking Regulatory Commission.


- Beijing plans to increase the number of taxis that run on natural gas from the current 99 to 2,000 by the end of July, in a trial project to promote the use of clean energy in public transportation.


- Police detained 30 suspects who used the popular smartphone tool WeChat in a highly organized ring that lured more than 600 men to buy overpriced drinks and food, officials said. The scam brought in about 800,000 yuan.


Fly On The Wall 7:00 AM Market Snapshot



Apache (APA) upgraded to Buy from Hold at Deutsche Bank
Baker Hughes (BHI) upgraded to Buy from Hold at Jefferies
Citrix Systems (CTXS) upgraded to Buy from Neutral at Goldman
ConocoPhillips (COP) upgraded to Overweight from Equal Weight at Barclays (CRM) upgraded to Conviction Buy from Buy at Goldman
Timken (TKR) upgraded to Buy from Hold at Jefferies


Chevron (CVX) downgraded to Equal Weight from Overweight at Barclays
Joy Global (JOY) downgraded to Neutral from Buy at Goldman
Occidental Petroleum (OXY) downgraded to Neutral from Buy at Sterne Agee


Audience (ADNC) initiated with a Hold at Benchmark Co.
Bank of Ireland (IRE) initiated with an Underweight at HSBC
Ellie Mae (ELLI) initiated with an Outperform at FBR Capital
Haemonetics (HAE) initiated with an Outperform at William Blair
Jive Software (JIVE) initiated with a Buy at Janney Capital
Northern Tier (NTI) initiated with a Buy at Citigroup
Workday (WDAY) initiated with a Market Perform at FBR Capital


Apple (AAPL) to face ban on some imports due to Samsung's (SSNLF) victory in the patent dispute, Bloomberg reports
Apple to appeal ITC ruling, said it won’t have immediate effect on products, CNBC reports
AIG (AIG) CEO Benmosche said has to make decision on International Lease Finance Corp. June 14
Doublelines Jeffrey Gundlach doesn’t like homebuilding stocks as a long idea (HOV, DHI, NVR, PHM, MDC, LEN, KBH, BZH, TOL, SPF, RYL) Said “likes bonds a lot more now”
Not interested in gold mining stocks
Meredith Whitney mentioned Discover (DFS) as an equity pick in financial services
Liked Bank of America (BAC) as a “fix-up” situation
Summit Midstream (SMLP) made two separate acquisitions of natural gas gathering systems totaling $460M in the Bakken and Marcellus shale plays
Penn West (PWE) to explore strategic alternatives
Fitch assigned STAG Industrial (STAG) initial 'BBB-' IDR, outlook positive


Companies that beat consensus earnings expectations last night and today include:
Harvest Natural (HNR), Exa Corp. (EXA), Bob Evans (BOBE), Bazaarvoice (BV), Ambarella (AMBA), Mattress Firm (MFRM), SHFL entertainment (SHFL)

Companies that missed consensus earnings expectations include:
Mitcham Industries (MIND), NCI Building Systems (NCS)

Companies that matched consensus earnings expectations include:
JoS. A. Bank (JOSB)


  • In a sign of how hard Wall Street is trying to satisfy voracious demand for higher returns amid rock-bottom interest rates, JPMorgan Chase (JPM) and Morgan Stanley (MS) bankers in London are moving to assemble so-called synthetic collateralized debt obligations, the Wall Street Journal reports
  • For the first time in a decade, Wall Street banks and trading firms (JPM, GS, BAC) are shrinking their footprint in the natural-gas storage business, as booming output damps price volatility and potential profits, the Wall Street Journal reports
  • The Fed is poised to evaluate and potentially make changes to its massive monetary stimulus, Dallas fed President Fisher, who is critical of the Fed's bond-buying program, said, adding, "The plot now thickens," Reuters reports
  • Canada rejected the transfer of Mobilicity's wireless spectrum licenses to Telus Corp. (TU), effectively blocking its takeover of the struggling start-up as the government seeks to hold back industry leaders from swallowing smaller rivals, Reuters reports
  • Argentina’s Supreme Court revoked the seizure of Chevron’s (CVX) assets in the country six months after an embargo was put in place that threatened to derail plans to develop shale deposits with state-run YPF (YPF), Bloomberg reports
  • Some of the largest U.S. providers of money-market mutual funds have sought a compromise on new regulation, making adoption of tougher rules for the $2.6T industry more likely if far from a sure bet. An SEC proposal would require the riskiest funds to end the longstanding practice of pricing shares at a fixed value of $1 and instead force them to float, Bloomberg reports


Fidelity Southern (LION) files to sell $60M in common stock
Giant Interactive (GA) files to sell 15.14M American Depositary Shares for holders
RCS Capital (RCAP) 2.5M share IPO priced at $20.00
Tile Shop (TTS) 4.25M share Secondary priced at $24.25
Ubiquiti Networks (UBNT) 6.5M share Secondary priced at $16.00