Frontrunning: August 5

  • Botulism toxin? There's an apology for that - Fonterra CEO apologizes, sees China dairy curbs lifted within days (Reuters)
  • Patent troll-In-Chief strikes again: Veto of Apple Ruling Likely to Upend Big Patent Battles (WSJ)
  • Because scapegoating means justice FTW - SEC Gets ‘Shot in the Arm’ With Victory in Tourre Case (BBG)
  • Insider-Trading Probe Caught in a Washington Knot (WSJ)
  • Miners return to hedging as gold  (FT)
  • Toyota’s $37 Billion Cash Pile Means Turning Point for Abenomics (BBG)
  • Inside the battle at Germany's Siemens (Reuters)
  • ‘One million’ UK workers on zero hours contracts (FT)
  • Wag the dog, part 1984: Iran Seen Trying New Path to a Bomb (WSJ)
  • Tokyo Cheap to Hong Kong Luring Asian Bargain Hunters (BBG)
  • For Twitter, Free Speech Is a High-Wire Act (WSJ)
  • Mursi backers march as envoys seek Egypt solution (Reuters)
  • IPhone Reprieve Seen Aiding Apple Sales, Hurting Samsung (BBG)


Overnight Media Digest


* JetBlue Airways Corp's plans to add premium seats on some of its planes marks a major shift for the discount carrier, which aims to stay relevant against resurgent full-service behemoths and new ultra low-cost carriers.

* Tyson Foods Inc, Hillshire Brands Co and Cargill Inc are due to report quarterly results that will shed light on whether consumers continue to show a preference for cheaper meats like pork and chicken at the expense of beef, which has hit record prices this year.

* Ambulance company Rural/Metro Corp filed for Chapter 11 bankruptcy protection on Sunday after striking a deal with lenders to trim its debt load. The Scottsdale, Arizona-based company, the country's largest ambulance operator serving rural communities, reported assets and debts each exceeding $500 million in its bankruptcy petition.

* Chinese regulators are scrutinizing two suppliers to Apple Inc and other gadget makers following allegations by environmental groups that plants run by the two companies are pumping large amounts of toxic heavy metals into nearby rivers. Officials are investigating plants owned by Taiwanese companies Foxconn Technology Co Ltd and UniMicron Technology Corp.

* Weinstein Co has held discussions with Miramax over a potential deal that would reunite two of the most powerful executives in the independent film world with the studio that made them famous. The talks began several weeks ago with a meeting of Weinstein Co Chief Executive Harvey Weinstein and Miramax Chairman Tom Barrack, said a person close to the negotiations.

* The Italian branch of British telecom company Vodafone Group PLC said on Sunday it has sued Telecom Italia SpA for abusing its dominant position in Italy, seeking damages of more than 1 billion euros ($1.33 billion). Vodafone alleged that Telecom Italia "committed a series of abuses between 2008 and 2013 with the intention and effect of impeding growth in competition in the Italian fixed-line market."

* On Sunday, there was no sign of a resolution in the blackout of CBS Corp's flagship network on Time Warner Cable Inc's systems in New York, Los Angeles and a few other markets. By Sunday afternoon the two companies couldn't even agree on whether any talks were under way.



Lloyds Banking Group Chief Executive Antonio Horta-Osorio told potential investors that he expects to see up to 70 percent of the bank's earnings returned to shareholders by 2015, according to sources.

Formula One Group and its private equity firm owners CVC were ordered by a London court to release hundreds of documents regarding the sale of a stake in the motor racing business, amid claims that its Chief Executive Bernie Ecclestone bribed a German banker to smooth the deal over seven years ago.

A group of OGX shareholders is considering legal action against the oil company's former directors and its Brazilian billionaire owner, Eike Batista, over allegations including insider trading as anger rises over the company's near collapse.

U.S. President Barack Obama reversed an import ban on older iPhone and iPad models, favouring Apple over Samsung in a long-running patent battle and undermining the U.S. trade panel's push for stricter global intellectual property regulation.

Publicis Groupe Chief Executive Maurice Levy said that the chances of closing a merger with Omnicom Group were so slim that his supervisory board was prepared to go ahead with its original plan to make him Publicis' chairman and appoint a new CEO.



* Unions in Germany say Amazon has imported American-style business practices, in particular, an antipathy to organized labor - that stand at odds with European norms. Other large American technology companies such as Facebook and Google have also been running into obstacles as they expand in Europe, with European privacy regulators considering tough regulations to protect consumers on the Internet.

* CBS Corp and Time Warner Cable Inc stayed in their respective corners on Sunday, and may not engage in further direct confrontation for some time. As a result, CBS's stations and cable networks remained blacked out in many areas, including large parts of New York, Los Angeles and Dallas.

* On Saturday it was announced that John Henry, the owner of the Boston Red Sox, would purchase the Boston Globe from the New York Times Co for $70 million in cash in a deal to close in a month or two. The sale continues a recent trend in the struggling newspaper industry: newspapers being returned to local owners, often at bargain-basement prices.

* China has halted imports of all milk powder from New Zealand and Australia, New Zealand's trade minister said on Sunday, after a bacterium that can cause botulism was found in some dairy products. Economists said a prolonged ban could create shortages in China, where nearly 90 percent of the milk powder imported last year originated in New Zealand.

* The London Metal Exchange and Goldman Sachs Group have been named as co-defendants in a class action lawsuit in the United States charging anticompetitive behavior in aluminum warehousing, said Hong Kong Exchanges and Clearing Limited, which owns the London market, on Sunday.




* Prime Minister Stephen Harper has just reshaped his Quebec operations, getting rid of his top Quebec adviser Andre Bachand a few weeks after replacing his regional minister from the province. Conservative insiders said the moves aim to place more energetic faces at the forefront of the government's operations in Quebec, with an eye on reclaiming some of the seats -- mainly in and around Quebec City -- that were lost to the New Democratic Party in 2011.

Reports in the business section:

* Coffee shop chain Tim Hortons Inc's growth in its core Canadian market is flat and its U.S. foray has been less than impressive. There's growing heat as well from two impatient American hedge funds seeking a big improvement in performance. Analysts and investors are watching closely for signs indicating where newly installed Chief Executive Marc Caira wants to take the chain.

* Most economists are predicting modest gains in the job market when Statistics Canada comes out with July's Labour Force Survey on Friday. In March, Statscan reported that 55,000 jobs were lost across the country. Only two months later, the survey recorded a whopping 95,000 new payrolls for May. In the last report, for the month of June, there was almost no change at all. It's unlikely that the national job market is as up-and-down as Statscan's numbers suggest, but no one seems to know what's behind the recent volatility.

* Not everyone is cheering TransCanada Corp's latest pipeline plan, especially industrial gas users in Ontario and in Quebec and the three gas distributors that serve them -- Union Gas Ltd, Enbridge Gas Distribution Inc and Gaz Metro Inc, as the proposed C$12 billion ($11.57 billion) Energy East project entails converting the existing TransCanada natural gas pipeline to oil.



- The scandal involving Fonterra in which the global dairy giant was accused of selling contaminated New Zealand-made whey protein concentrate to eight customers, including those in China, calls for the Chinese government to tighten standards for its dairy industry, experts said.

- The State Council, or cabinet, has promulgated detailed guidelines for upgrading China's shipbuilding industry.


-- Scorching weather has worsened a drought that has spread in China's eastern and southern regions since mid-July, with 3.5 million hectares of farmland having been affected and 4.39 million people suffering from a shortage of drinking water by Sunday.


- The Ministry of Commerce may announce measures to boost foreign trade via electronic commerce later this year.

- China's commodity trading companies have made good profits since the Shanghai Commodity Futures Exchange started a night session on gold and silver trading one month ago.


- New regulations taking effect on Monday that loosen grip on life insurance interest rates are likely to create 400 billion yuan ($65 billion) in new business for Chinese insurers, officials at the China Insurance Regulatory Commission said.


Fly On The Wall 7:00 AM Market Snapshot



AMN Healthcare (AHS) upgraded to Neutral from Sell at UBS
Coca-Cola Femsa (KOF) upgraded to Buy from Neutral at Goldman
Cowen Group (COWN) upgraded to Outperform from Market Perform at Keefe Bruyette
Duke Energy (DUK) upgraded to Buy from Neutral at Citigroup
MicroStrategy (MSTR) upgraded to Buy from Neutral at Roth Capital
OMA Airports (OMAB) upgraded to Overweight from Equal Weight at Barclays
Sealed Air (SEE) upgraded to Neutral from Underperform at Macquarie
Steven Madden (SHOO) upgraded to Buy from Sell at Goldman
TriCo Bancshares (TCBK) upgraded to Outperform from Market Perform at Raymond James


Allstate (ALL) downgraded to Hold from Buy at Deutsche Bank
Ameriprise (AMP) downgraded to Neutral from Buy at Citigroup
Brinker (EAT) downgraded to Market Perform from Outperform at Raymond James
CBOE Holdings (CBOE) downgraded to Neutral from Buy at Goldman
Chubb (CB) downgraded to Hold from Buy at Deutsche Bank
Fossil (FOSL) downgraded to Underweight from Equal Weight at Barclays
Government Properties (GOV) downgraded to Underperform at RBC Capital
Hillshire Brands (HSH) downgraded to Underperform from Market Perform at Wells Fargo
Kinross Gold (KGC) downgraded to Neutral from Buy at Citigroup
Kraft Foods (KRFT) downgraded to Hold from Buy at Jefferies
Qualcomm (QCOM) downgraded to Neutral from Overweight at Piper Jaffray
Salix (SLXP) downgraded to Hold from Buy at Cantor
Solar Capital (SLRC) downgraded to Market Perform from Outperform at JMP Securities
Spreadtrum (SPRD) downgraded to Hold from Buy at Jefferies
Strategic Hotels (BEE) downgraded to Market Perform from Outperform at Wells Fargo
Swift Energy (SFY) downgraded to Neutral from Outperform at Credit Suisse
Teva (TEVA) downgraded to Underweight from Equal Weight at Morgan Stanley


Level 3 (LVLT) initiated with a Neutral at Macquarie
NRG Yield (NYLD) initiated with a Neutral at UBS
Pentair (PNR) initiated with an Overweight at JPMorgan


Morgan Stanley (MS) said DOJ probe into CDS market “ongoing”
Time Warner Cable (TWC) confirmed CBS (CBS) programming no longer available
Time Warner Cable CEO said wants to put CBS back on at sensible price
U.S Trade representative vetoed ban on sale of some Apple (AAPL) devices (SSNLF)
New York Times Co. (NYT) to sell New England Media Group to an acquisition company owned by John W. Henry, principal owner of Fenway Sports Group, for $70M in cash
Compugen (CGEN) announced collaboration, license agreement with Bayer (BAYRY)
North South Holdings sued T-Mobile (TMUS) for patent infringement


Companies that beat consensus earnings expectations last night and today include:
Hawaiian Telcom (HCOM), GW Pharmaceuticals (GWPH)

Companies that missed consensus earnings expectations include:
Rockwood (ROC), FreightCar America (RAIL)


  • The Obama administration's decision to overturn an international trade ruling against Apple (AAPL, SSNLF)—the first such veto in over 25 years—promises to upend long-running battles over intellectual property in the smartphone market and change the strategies some of the world's biggest technology companies use to defend their inventions, the Wall Street Journal reports
  • Predicting that transmission of TV will move to the Internet eventually (TWC, CBS), Cablevision Systems (CVC) CEO James Dolan says "there could come a day" when his company stops offering TV service, making broadband its primary offering, the Wall Street Journal reports 
  • After focusing for years on jetliners that could fly ever further, the world's leading plane makers (BA, EADSY) are turning to shorter range aircraft that appeal to airlines reluctant to pay for performance they don't need, Reuters reports
  • Low-price retailer T.J. Maxx (TJX) plans to open an online store this year, as does rival Saks (SKS) Off Fifth outlets, making 2013 the year technology may have caught up with the speed of fashion, Reuters reports
  • Oil explorers (EOG, PXD, CLR) focused on high-margin shale drilling from Texas to North Dakota are set to outperform Big Oil (BP, XOM, RDS.A) this year, Bloomberg reports
  • Hedge funds lowered bullish gold bets for the first time in five weeks as signs of accelerating U.S. growth contributed to the longest retreat in prices in a month. Money managers cut their net-long position by 6.5% to 65,517 futures and options by July 30, U.S. Commodity Futures Trading Commission data show, Bloomberg reports


Netflix (NFLX) won't overthrow linear TV providers (AAPL, GOOG, INTC, TWC, CMCSA, CVC, DTV, DISH)
Comcast (CMCSA) could have an upside of over 20%
Dell (DELL) shares may have little upside left
Green Mountain (GMCR) could drop 20%
Franklin Resources (BEN) could rise 20% in the next year
United Financial (UBNK), Investors Bancorp (ISBC) are appealing thrift stocks
Time to take profits in chip-equipment makers (FORM, AMAT, MTSN, KLAC, LRCX)


Keryx (KERX) files to sell $150M of common stock, warrants
OPKO Health (OPK) files to sell 586K shares of common stock for holders
XPO Logistics (XPO) files to sell 8M shares of common stock