Frontrunning: March 27

  • BOE to Sign Agreement With China on Yuan Clearing Next Week (BBG)
  • U.S. law firm plans to bring suit against Boeing, Malaysia Airlines (Reuters)
  • Citigroup Fraud Stings Mexico Star as Medina-Mora Chased (BBG)
  • Fraternity Chief Feared for Son as Hazings Spurred JPMorgan Snub (BBG)
  • UBS suspends six more forex traders (FT)
  • Goodbye CSCO Q1 EPS: China to strengthen Internet security after U.S. spying report (Reuters)
  • Good luck: Spain Banks With $55 Billion of Property Seek Deals (BBG)
  • Citic Pacific Said to Plan About $4 Billion Public Offering (BBG)
  • Yahoo Japan to buy eAccess from SoftBank for $3.2 billion (Reuters)
  • "Whatever it takes" to talk down the Euro: Euro, peripheral bond yields fall on ECB easing debate (Reuters)
  • Obama and Pope Francis Meet in Rome (Reuters)
  • License Plate Technology at Risk Post-Snowden (BBG)
  • Robert Shiller on the art of stock-picking and the complex psychology of investors (WSJ)
  • U.S. jobs market dropouts increasingly likely to stay out (Reuters)


Overnight Media Digest


* Citigroup Inc failed to get Federal Reserve approval to reward investors with higher dividends and stock buybacks, a surprising blow to Chief Executive Michael Corbat's effort to bolster the bank's reputation following a 2008 government rescue. The Fed rejected capital plans from five large banks and approved 25 as part of its annual "stress tests" measuring a firm's ability to continue lending during a severe economic downturn. (

* Bank of America Corp and former Chief Executive Kenneth Lewis took big steps to put the financial crisis behind them by paying state and federal agencies to settle lawsuits over the acquisitions of Countrywide Financial Corp and Merrill Lynch & Co. The Charlotte, North Carolina-based lender said it would pay $9.5 billion to settle mortgage claims with Fannie Mae, Freddie Mac and their federal regulator. (

* Brookstone Inc, which sells consumer gadgets ranging from travel electronics to massage chairs, is preparing to file for bankruptcy protection as early as Sunday, with a plan in place to be bought by another specialty retailer Spencer Spirit Holdings Inc, people familiar with the matter said. (

* Microsoft Corp's new boss on Thursday will have his first shot at outlining a new, less Windows-dependent path for the company. Chief Executive Satya Nadella, at an event in San Francisco, is expected to disclose a new version of Microsoft's popular Office software for the iPad, people familiar with the matter said. (

* An internal investigation into the George Washington Bridge lane closures conducted by lawyers hired by the Christie administration is expected to absolve additional members of Governor Chris Christie's senior staff from being involved in the matter. (



Sources said the International Monetary Fund would announce a rescue package for Ukraine of about $15 billion as early as Thursday, hoping that the initial aid payments could be made by the end of April.

Bank of America agreed on Wednesday to pay $9.5 billion to settle claims it sold U.S. housing regulators faulty mortgage bonds.

The U.S. Federal Reserve rejected the capital plans of five large banks including Citigroup as part of its annual stress test, but cleared Bank of America and Goldman Sachs after they agreed to lower buyback and dividend proposals.

Mexico expects to issue tenders for some deep water oilfields next year as it welcomes private investment at its oil and gas exploration and production sector.

King Digital Entertainment's shares fell more than 15 percent on its New York stock market debut, making the Candy Crush Saga maker the largest new U.S. listing to flop on its opening day in 20 years



* The Federal Reserve dealt an embarrassing blow to Citigroup Inc on Wednesday when it rejected the company's plans to manage its capital, citing concerns about the "overall reliability of Citigroup's capital planning process." It was the only one among the top five banks that failed to persuade the Fed to bless its plans of increasing dividends and repurchasing stock. (

* Rupert Murdoch appointed his two sons, Lachlan and James to senior positions at his companies News Corp and Twenty-first Century Fox, ensuring that a media conglomerate that has always been run like a small family business would have a Murdoch in charge for years to come.(

* Children of elderly borrowers are learning that their parents' reverse mortgages are now threatening their own inheritances. Under federal rules, survivors are supposed to be offered the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full. (

* Bank of America Corp is paying $6.3 billion to settle a lawsuit arising out of troubled mortgage-backed securities it sold to Fannie Mae and Freddie Mac in the run up to the financial crisis. As part of the settlement, Bank of America will also repurchase mortgage securities from Fannie and Freddie that are valued at about $3.2 billion. (

* Candy Crush Saga-developer King Digital Entertainment saw its stock slump as trade opened on Wednesday, and ended the day down 15.6 percent, closing at $19 per share. The sheer drop disappointed investors who scooped up the stock at the initial public offering, as well as those who bought shares Wednesday morning. (

* In the fifth huge recall for automakers this year, Nissan Motor Co Ltd is recalling nearly a million vehicles because the front passenger-side air bag might not deploy in a crash, the company said in a report to regulators published on Wednesday. (

* A growing number of big corporate clients are demanding that their law firms demonstrate that their computer systems are employing top-tier technologies to detect and deter attacks from hackers bent on getting their hands on corporate secrets either for their own use or sale to others. (

* Yet another proposal to overhaul United States' housing finance system will be put before Congress on Thursday. The major distinction of this proposal is that it would make the mortgage lending system more like a public utility, by creating a co-op of lenders that would be the sole issuer of mortgage-backed securities guaranteed by the government. (

* Two Democratic senators on Wednesday criticized Target Corp's management for not stopping a huge data breach of its systems, citing several missed opportunities to thwart the attack and protect customer data. John D. Rockefeller from West Virginia, chairman of the Senate Commerce Committee, and Richard Blumenthal from Connecticut said Target's failure to heed warning signs of incursions by cyber criminals ultimately was the fault of its top executives. (

* Connecticut lawmakers on Wednesday became the first in the country to pass legislation that would increase a state's minimum wage to $10.10 an hour by 2017, the same rate President Obama wants for the federal minimum wage. (




* Canadian Prime Minister Stephen Harper and his U.S. counterpart Barack Obama are urging European allies to support sanctions targeting Russia's energy sector, with both leaders saying North America could help Western Europe end its dependence on Russian natural gas. (

* After a day of tense negotiations under threat of a back-to-work order, British Columbia Premier Christy Clark signed a settlement with union and non-union truckers to end the strike that has snarled shipping at the Port Metro Vancouver for almost a month. (

Reports in the business section:

* Just one week after Jim Flaherty stepped down as the Canadian finance minister, Bank of Montreal is shaking up the mortgage market, aggressively cutting its five-year rate to levels that caused him to intervene last year. BMO is now offering five-year fixed mortgages at 2.99 percent, slashing its rate from 3.49 percent. (


* Toronto Mayor Rob Ford took more than a few punches but remained light on his feet at the inaugural televised debate in mayoral election that saw challengers skirt around the police investigation into him and not once utter the words "crack cocaine." (

* Quebec Premier Pauline Marois's insistence that her party is a model of political integrity took a hit on Wednesday as it emerged that Quebec's anti-corruption police are looking into past Parti Quebecois fundraising practices. (


* Quebec's Liberal Party says the separatist Party Quebecois has gone too far in its dream of the province as a petroleum promised land and that no public money should be spent on early-stage oil drilling projects such as those on Anticosti island. (

* BlackBerry Ltd Chief Executive John Chen says he is fighting against future product leaks by taking "legal action" that he hopes will set an example. The head of the Waterloo, Ontario-based smartphone company alleges that a person he did not name stole confidential details about a future BlackBerry product and leaked them to the public. (




- China's pension investment fund reported a net profit of 69.6 billion yuan ($11.21 billion) in 2013, up 6.29 percent from a year earlier, the National Council for Social Security fund said.

- Average daily power output and daily rail transport volume has picked up in March, a sign that the economic activities were gaining pace, said Li Pumin, spokesman of the National Development and Reform Commission.


- China will launch the Baotou Rare Earth Products Exchange on March 28, the first such exchange in the country that aims to provide open prices for rare earth products, it said on its official website.


- The central government will introduce a credit rating system for provinces, cities and counties as it seeks to establish a foundation for a well-regulated municipal debt market, said a source at the Ministry of Finance.



The Telegraph


Royal Bank of Scotland's U.S. business has been barred from raising its dividend by the Federal Reserve after being deemed unable to survive another financial crisis. (


Changes to Britain's pension rules must not be allowed to create an "open-ended liability" for the insurance industry, the boss of Legal & General has warned, as he forecast a 75 percent contraction in the individual annuity market. (


Shares in the London-based smartphone games developer King tanked on their first day of trading on Wall Street on Wednesday, as the company failed to overcome fears it could prove to be a flash in the pan. (

The Guardian


The online lender Wonga is testing out new loans repaid over a six-month period, and has dropped a service that allowed consumers to pay for goods from online retailers using credit. (


The taxpayer's stake in Lloyds Banking Group has been cut to 25 percent, after the government sold shares worth 4.2 billion pounds on Tuesday night. (


SSE, the UK's second-largest energy provider, is to freeze gas and electricity prices for its 5 million customers until 2016, putting pressure on rivals to follow. (

The Times


George Osborne's high-stakes gamble of ruling out a currency union between an independent Scotland and the rest of the UK appears to have backfired, with more Scots believing that he is "bluffing" than telling the truth, a poll for The Times has found. (

The Independent


Switzerland has named the British banker Mark Branson as the new head of its financial market regulator, it emerged yesterday. (



Fly On The Wall 7:00 AM Market Snapshot


Domestic economic reports scheduled today include:

Fourth quarter GDP growth at 8:30--consensus 2.7%
Jobless claims for week of March 22 at 8:30--consensus 323K
Pending home sales for February at 10:00--consensus up 0.2% for the month



BankUnited (BKU) upgraded to Overweight from Equal Weight at Morgan Stanley
Federated Investors (FII) upgraded to Neutral from Underperform at Sterne Agee
New York Times (NYT) upgraded to Overweight from Equal Weight at Evercore
PVH Corp. (PVH) upgraded to Conviction Buy from Buy at Goldman


BlackBerry (BBRY) downgraded to Sell from Hold at Societe Generale
CECO Environmental (CECE) downgraded to Market Perform at FBR Capital
Citigroup (C) downgraded to Market Perform from Outperform at Bernstein
Citigroup (C) downgraded to Market Perform from Outperform at Keefe Bruyette
Five Star (FVE) downgraded to Market Perform from Outperform at JMP Securities


Active Power (ACPW) initiated with a Buy at Roth Capital
Amgen (AMGN) initiated with an Overweight at Morgan Stanley
Associated Banc-Corp (ASBC) initiated with a Neutral at DA Davidson
Biogen (BIIB) initiated with an Overweight at Morgan Stanley
Celgene (CELG) initiated with an Equal Weight at Morgan Stanley
Cemig (CIG) initiated with a Buy at Goldman
Gilead (GILD) initiated with an Equal Weight at Morgan Stanley
ICON plc (ICLR) initiated with an Outperform at Credit Suisse
Independence Realty Trust (irt) initiated with a Buy at Deutsche Bank
Pharmacyclics (PCYC) initiated with an Equal Weight at Morgan Stanley
Regeneron (REGN) initiated with an Equal Weight at Morgan Stanley
RingCentral (RNG) initiated with an Outperform at Macquarie
Roundy's (RNDY) initiated with a Buy at BofA/Merrill
TCF Financial (TCB) initiated with a Neutral at DA Davidson


Bank of America (BAC) received approval from the Federal Reserve for its 2014 capital plan; the bank will repurchase $4B of its common stock and increase its dividend to 5c from 1c per share
Bank of America (BAC) also announced a more than $9B settlement with the FHFA related to mortgage-backed securities sold to Fannie Mae (FNMA) and Freddie Mac (FMCC) between 2005 and 2007
JPMorgan (JPM) and Morgan Stanley (MS) both received approval from the Federal Reserve for their proposed 2014 capital plans
The Federal Reserve rejected Citigroup's (C) capital plan for 2014, which included a proposed $6.4B share repurchase program and an increase of the bank's dividend to 5c per share. Citi will be allowed to continue with its current capital actions, which include a $1.2B share repurchase program and a 1c per share dividend
Essex Property Trust (ESS) will join the S&P 500, replacing Cliffs Natural (CLF), as of the market close on April 1
Santander (SAN) said it will resubmit capital plan after Fed objects for qualitative reasons
Yahoo Japan (YHOO) to buy eAccess from SoftBank (SFTBF) for Y324B


Companies that beat consensus earnings expectations last night and today include:
Leidos (LDOS), Vince Holding (VNCE), Paychex (PAYX)

Companies that missed consensus earnings expectations include:
Signet Jewelers (SIG), H.B. Fuller (FUL), American Eagle Energy (AMZG), Revance Therapeutics (RVNC), Cancer Genetics (CGIX)


Twitter (TWTR) expected to introduce new music strategy this week, WSJ reports
Microsoft (MSFT) expected to announce new version of Office for iPad, WSJ reports
UBS (UBS) has suspended six more forex traders, FT reports
Amazon (AMZN) received clearance to provide more cloud services to Pentagon, FT reports
Intel to support Cloudera and stop its distribution of Hadoop, Venture Beat says
Target (TGT) and Visa (V) say fraud limited following data breach, WSJ reports
Facebook (FB) denies Oculus hardware redesign, Re/code reports

SYNDICATE  (WBAI) files to sell $360M of American Depositary Shares
Advaxis (ADXS) 4.08M share Spot Secondary priced at $3.00
Applied Genetic Technologies (AGTC) 4.17M share IPO priced at $12.00
Ford (F) files to sell 1.34M shares of common stock for holders
Marchex (MCHX) 5.714M share Secondary priced at $10.50
Old Second Bancorp (OSBC) files to sell 13.5M shares of common stock
PennyMac (PFSI) 5.555M share Secondary priced at $16.50
Realty Income (O) 12M share Spot Secondary priced at $39.96
SciQuest (SQI) 3M share Secondary priced at $26.75
Solazyme (SZYM) 5M share Secondary priced at $11.00
Square 1 Financial (SQBK) 5.78M share IPO priced at $18.00
TriNet (TNET) 15M share IPO priced at $16.00
William Lyon Homes (WLH) 2M share Secondary priced at $27.25