Frontrunning: June 19

  • Currency Probe Widens as U.S. Said to Target Markups (BBG)
  • Battle for Iraq refinery as U.S. hesitates to strike (Reuters)
  • Ukraine forces battle separatists after truce 'refused' (Reuters)
  • Fed Dots Ignored as Investors Focus on Yellen’s Message (BBG)
  • Retirees Suffer as $300 Billion 401(k) Rollover Boom Enriches Brokers (BBG)
  • American Apparel ousts CEO; source says Dov Charney 'will fight like hell' (LA Times)
  • House Panel Is Subpoenaed as Trading Probe Heats Up (WSJ)
  • GM Officials Ignored Alert on Car Stalling (WSJ)
  • Russia’s $20 Billion Bond Void Filled by China to Mexico (BBG)
  • Ex-Goldman Trader Says Bonus Cut to $8.25 Million Unfair (BBG)
  • Markit Raises $1.3 Billion in Expanded IPO (WSJ)
  • Poroshenko Plans Talks After Offer of Truce in E. Ukraine (BBG)
  • YouTube Clashes With Labels Over Licensing Deals (WSJ)


Overnight Media Digest


* A General Motors Co employee warned in 2005 that the auto maker had a "serious safety problem" with the design of ignition switches used on the 2006 Impala that could lead to a "big recall," but the company didn't recall the vehicles until early this week. (

* American Apparel Inc's board moved Wednesday to fire founder and Chief Executive Dov Charney, citing an "ongoing investigation into alleged misconduct." (

* YouTube confirmed plans to launch a long-awaited music-subscription service, but some independent labels are refusing to sign on as the online video company pushes for cut-rate licensing deals. (

* The head of the largest U.S. space company, United Launch Alliance LLC, moved to calm fears among military chiefs and lawmakers about an interruption to supplies of the Russian-made rocket engines used to launch satellites for the Pentagon. The company, a joint venture between Boeing Co and Lockheed Martin Corp, meanwhile is studying a new domestic alternative that industry experts said could take the government and any selected contractor $2 billion and up to seven years to develop. (

* Digital subscriber line (DSL) companies are lagging behind cable and fiber broadband providers when it comes to download speeds, according to a new report from the Federal Communications Commission. The agency released its fourth annual report on broadband speeds, which showed once again that broadband providers are gradually increasing performance while delivering close to advertised speeds most of the time. (

* General Electric Co Chief Executive Jeffrey Immelt is set to meet French Economy Minister Arnaud Montebourg in Paris on Thursday, the third time the executive has visited the City of Light since GE launched its $17 billion bid for Alstom SA's energy business in late April. (

* News Corp on Wednesday extended its shareholder rights plan for another year, giving the media company additional time to evaluate options without potential interference from an outside investor. The shareholder rights plan, which is also known as a poison pill, was set to expire June 28, a year after the company separated from entertainment giant 21st Century Fox Corp. The extension runs through June 18, 2015. (

* Owners of Markit Ltd, the Wall Street financial-data provider, raised $1.3 billion in a larger-than-expected initial public offering of shares, according to people familiar with the deal. (



Lloyds Banking Group is set to value its newly created TSB offshoot at almost 300 million pounds less than the most recent valuation in its accounts. This will value TSB at about 1.3 billion pounds when pricing its share offer on Thursday.

The U.S. Federal Reserve it cut the monthly pace of its bond buying to $35 billion even as it played down the risk of higher inflation on Wednesday.

The UK Independence party has secured up to 14 million euros of EU taxpayers funding after Nigel Farage, the leader of UKIP, won enough allies in the European parliament to form a group.

Companies chose to boost shareholder returns in the absence of robust revenue growth causing U.S. share buybacks and dividend payments to climb to a record level in the first quarter of 2014.

Amazon made an entry in the smartphone market on Wednesday, launching a handset called Fire taking on big-gun rivals Apple and Samsung.


* In the face of Detroit's tumultuous bankruptcy proceedings, in which multiple parties are quarreling to protect their interests, the city and its unions have quietly negotiated a scaled-back pension plan that could serve as a model for other troubled governments. One of the most closely watched issues of the case is whether a government pension plan can be legally cut in bankruptcy. (

* Citigroup on Thursday appointed Mark Slaughter, a senior New York banker, as its head of corporate and investment banking for Asia-Pacific, filling a vacancy created last month when Farhan Faruqui left to join the Australia and New Zealand Banking Group. (

* A fierce legal battle between Argentina and New York hedge funds took a new twist on Wednesday when the country offered to negotiate with the funds just hours after announcing measures that would help it avoid a settlement. (

* One of the most important names in the world of debt trading, Markit Ltd, is poised to join the public stock markets - and generate a payday for the banks that are both owners and customers of the financial data firm. Markit raised nearly $1.3 billion in its initial public offering on Wednesday, valuing the company at $4.3 billion. (

* The Securities and Exchange Commission's insider trading lawsuit against Steven Cohen's former hedge fund SAC Capital Advisors is finally over. Judge Victor Marrero of the Federal District Court in Manhattan gave final approval on Wednesday to a $602 million settlement that does not require Cohen's former firm, now called Point72 Asset Management, to admit any wrongdoing. (




* Alberta's beleaguered disaster-compensation system triggered warnings from federal auditors well before the worst flooding in provincial history swamped 30 communities, temporarily shuttered Calgary's downtown and forced more than 56,000 people to flee their homes nearly one year ago. The warnings, undisclosed publicly until now, stemmed from audits of Alberta government requests for disaster aid in the wake of flooding in 2005 and 2007. (

* The battle over Northern Gateway could spill into British Columbia's emerging liquefied natural gas sector if First Nations withdraw or temper their support for LNG projects to press the provincial government to block the Enbridge Inc pipelines. (

* Clothing retailer American Apparel Inc fired its founder Dov Charney as chairman and chief executive following an ongoing investigation into alleged misconduct and said it had appointed an interim CEO. (

Reports in the business section:

* Enbridge Inc is hoping to win over Coastal First Nations who adamantly oppose its Northern Gateway pipeline with a claim that the controversial project would actually improve marine safety in the treacherous waters off the British Columbia coast despite the increase in supertanker traffic. (

* The mood of long-suffering Canadian exporters is on the upswing again. Optimism among exporters, who are convinced that the U.S. recovery is for real, has improved for the third consecutive time, and is now higher than it was when the global economy was booming before the Great Recession, according to Export Development Canada's semi-annual Trade Confidence Index. (


* Over the past few years, as Vancouverites dramatically ramped up their urban composting, some doomsayers predicted that putting out thousands of bins of rotting food would bring a reckoning of vermin upon the city. Last Friday, their worst fears appeared to be confirmed when children at a downtown daycare showed up to find their playground overrun by compost-eating rats. (

* Former senator Pamela Wallin believed Conservative senators had placed a spy in her office as part of a plot by members of her own party to "get her," a new book alleges. "Wallin believed, as she told me in October 2013, that hard-core right-wing elements in the Conservative caucus had it out for her because she didn't 'have an R branded on my forehead' - she was not Reform enough," writes Patrick Boyer in "Our Scandalous Senate." (


* A prolonged Iraq crisis could fuel spending in Canada's energy sector, boosting an already expansionary picture for the oil patch this year, according to global investment bank Barclays Bank Plc. "The Iraq situation is potentially helpful not only to the U.S. but also to Canada," Barclays Capital analyst James West told the Financial Post during a conference call on Wednesday to launch a new report on global oil and gas spending this year. "It is the quickest market to put capital to work to as prices move up." (

* U.S. tax authorities are relaxing the rules and lightening penalties to induce American and dual citizens living abroad to comply with tax filing rules in the United States. Michael Danilack, a deputy commissioner at the Internal Revenue Service, said the changes should mean those affected - including up to one million people in Canada - "can sleep at night" knowing that they comply with U.S. rules and no longer face the prospect of financial penalties even if they owe no taxes. (


Hong Kong


-- Passengers who sexually harass staff on Hong Kong aircraft could soon feel the weight of local law after the government announced a bill to clamp down on mile-high sex pests. The bill would make the sexual harassment of flight attendants a civil offence, with offenders liable to be brought before a court for financial damages. (

-- Hong Kong's Financial Services Development Council proposed the creation of several new listing boards, including one specialising in companies with unique shareholding structures, in a widely anticipated report which came after the city lost the mega initial public offering of e-commerce giant Alibaba Group (IPO-ALIB.N) to New York. (

-- While Premier Li Keqiang tours Britain, the yuan took another major step on its global journey as Beijing said the currency will start trading directly with the British pound from Thursday. (


-- Customs officers have smashed a racket that they believe helped football fans watch World Cup matches live without having to pay TV stations in Hong Kong. A Customs spokesman said a syndicate sold set-top boxes which allowed those who bought them to watch paid TV channels. Each unit was sold for HK$1,700 ($220). (

-- Property conglomerate Lai Sun Group is to invest up to HK$18 billion ($2.32 billion) in its cultural-cum-commercial project on Hengqin island in Zhuhai. Construction of the first phase of development is expected to begin this year, said Chew Fook-aun, deputy chairman of Lai Sun Development and Lai Sun International. (

-- A8 Digital Music confirmed it could be entering a cooperation deal with Chinese phone maker Xiaomi. Such an arrangement would link the digital entertainment provider with one of China's largest handset makers. (


-- Chinese home appliance retailer Huiyin Household Appliances (Holdings) Co Ltd, which recently announced it would expand into China's lottery agency sales business, plans to sell lottery through its existing 2,700 point of sales distribution network in the country, said chairman Cao Kuanping.


-- Tycoon Li Ka-shing-controlled investment fund Horizons Ventures has led a consortium to invest in Modern Meadow and has completed the first round of a $10 million investment into the startup that can grow leather and meat in a lab.


The Telegraph



Nine-member monetary policy committee minutes say there is a risk stronger than expected growth in coming months could drive sharper wage growth and trigger a rate rise to curb inflation



Vince Cable has warned the Bank of England that raising interest rates prematurely or introducing strict regulation could threaten the economy by choking off business lending.

The Guardian



Zoopla has priced its flotation in the lower half of its proposed range, valuing the property website at less than the £1 billion it was seeking.



Ed Balls has hinted that if he were chancellor in a future Labour government he would resign if talks began on currency union with an independent Scotland. He claimed the pact would be "very dangerous" for both countries.

The Times



Mike Ashley has taken a 12 million pound stake in MySale and signed a joint venture agreement with the online retailer - just days after it floated on AIM.



Amazon has unveiled its first smartphone, a device that the world's largest online retailer hopes will delight users with a groundbreaking new 3-D screen - and nudge its customers into buying yet more of its goods.

The Independent



The Bank of England unanimously voted to hold borrowing cost at 0.5 percent, despite speculation over a split decision after Governor Mark Carney said interest rates could "rise sooner" than expected.But the minutes revealed the consensus is becoming more fragile by the month with Martin Weale - the last current member of the MPC to vote for a hike in July 2011 - giving the clearest sign he is ready to cast the first vote for higher interest rates in almost three years.



Serco's new Chief Executive Officer Rupert Soames has taken direct control of the outsourcer's scandal-struck Australian business and is splitting up its rail joint venture with Abellio in a new overhaul.



Fly On The Wall 7:00 AM Market Snapshot


Domestic economic reports scheduled today include:
Jobless claims for the week of June 14 at 8:30--consensus 313K
Philadelphia Fed manufacturing index for June at 10:00--consensus 13.0
Leading indicators for May at 10:00--consensus up 0.6%



AngioDynamics (ANGO) upgraded to Buy from Hold at Canaccord
Atlantic Power (AT) upgraded to Sector Perform from Underperform at RBC Capital
Bruker (BRKR) upgraded to Outperform from Market Perform at Wells Fargo
FedEx (FDX) upgraded to Sector Perform from Underperform at RBC Capital
Spirit AeroSystems (SPR) upgraded to Buy from Neutral at Sterne Agee
Starbucks (SBUX) upgraded to Buy from Neutral at UBS


Bill Barrett (BBG) downgraded to Neutral from Buy at Mizuho
Canon (CAJ) downgraded to Hold from Buy at Jefferies
NVIDIA (NVDA) downgraded to Underperform from Neutral at BofA/Merrill
Trulia (TRLA) downgraded to Sector Perform from Outperform at RBC Capital
Vodafone (VOD) downgraded to Neutral from Buy at BofA/Merrill


Cisco (CSCO) initiated with a Neutral at Buckingham
Dr Pepper Snapple (DPS) initiated with a Sell at BTIG
ExOne (XONE) initiated with a Hold at Brean Capital
Extreme Networks (EXTR) initiated with a Neutral at Buckingham
F5 Networks (FFIV) initiated with a Neutral at Buckingham
Juniper (JNPR) initiated with a Buy at Buckingham
Keurig Green Mountain (GMCR) initiated with a Neutral at BTIG
Monster Beverage (MNST) initiated with a Buy at BTIG
Monster Beverage (MNST) initiated with an Outperform at Wells Fargo
RCS Capital (RCAP) initiated with an Overweight at Barclays
Rex Energy (REXX) initiated with an Outperform at Imperial Capital
Voxeljet (VJET) initiated with a Hold at Brean Capital


American Apparel's (APP) board voted to replace Dov Charney as chairman and notified him of its intent to terminate his employment as president and CEO for cause. Jim Luttrell has been named interim CEO and Allan mayer and David Danziger as co-chairmen
News Corp. (NWSA) extended its shareholder rights plan until June 18, 2015
TE Connectivity (TEL) said it will buy Measurement Specialties (MEAS) for $1.7B
T-Mobile (TMUS) said customers can stream music without data plan impact
Rolls-Royce (RYCEY) announced a GBP1B share buyback, confirmed FY14, FY15 guidance
Red Hat (RHT), which lowered its FY15 EPS view, said recent acquisitions to add to OpenStack effort but dilutive to EPS
Alco Stores (ALCS) reported that CFO Wayne Peterson has left the company
Qiagen (QGEN) received FDA approval of artus CMV RGQ MDx kit


Companies that beat consensus earnings expectations last night and today include:
IHS Inc. (IHS), Clarcor (CLC), China Cord Blood (co), Red Hat (RHT), Jabil Circuit (JBL)

Companies that missed consensus earnings expectations include:
Pier 1 Imports (PIR), Alder reports Q1 EPS ($5.38)


General Motors (GM) employee warned about stalling Impala in 2005, AP reports
Blackrock (BLK), Pimco suing several banks (USB, DB, WFC, C, HSBC, BK) for trustee roles, WSJ reports
GE (GE) plans rail signaling, grid offers to score Alstom (ALSMY), Reuters says
Paris demanding French minority ownership in Alstom (ALSMY) in GE's (GE) bid, FT reports
CNOOC (CEO) in talks to acquire buy 30%-40% of Aphrodite field, Globes says (NBL, DK)
Facebook (FB) suffers brief outage Thursday morning, FT reports
Amazon Phone (AMZN) will get prominent position in AT&T (T) stores, CNET says
Toyota (TM) announces new voice recognition service, Nikkei reports


Abraxas Petroleum (AXAS) 10M share Secondary priced at $5.00
Ardelyx (ARDX) 4.286M share IPO priced at $14.00
Chemical Financial (CHFC) files to sell $70M of common stock
Education Realty (EDR) files to sell 19.8M shares of common stock
Five Oaks (OAKS) files to sell 3.5M shares of common stock
GW Pharmaceuticals (GWPH) 1.7M share Secondary priced at $86.83
Globalstar (GSAT) files to sell $9.94M of common stock for holders
Markit (MRKT) 53.47M share IPO priced at $24.00
Receptos (RCPT) 4.43M share Secondary priced at $40.25
Revance Therapeutics (RVNC) 4M share Secondary priced at $30.50
Seadrill Partners (SDLP) files to sell 6.1M common units
Zafgen (ZFGN) 6M share IPO priced at $16.00