Frontrunning: June 28

  • Funny WSJ headline: Berlin Blinks on Shared Debt  (WSJ)... sure: if XO hits 1000 bps tomorrow, Eurobonds in 2 days
  • Barclays $451 Million Libor Fine Paves Way for Competitors (Bloomberg)
  • Fed officials differ on whether more easing needed (Reuters)
  • China Local Government Finances Are Unsustainable, Auditor Says (Bloomberg)
  • Just because the NYT is not enough, Krugman has now metastasized to the FT: A manifesto for economic sense (FT)
  • Merkel dubs quick bond solutions ‘eyewash’ (FT)
  • Yuan trade settlements encouraged in SAR (China Daily)
  • Katrina Comeback Makes New Orleans Fastest-Growing City (Bloomberg)
  • European Leaders Seek to Overcome Divisions at Summit (Bloomberg)
  • Obama ahead in battleground states (FT)
  • Hague presses for audit on EU law (FT)
  • China’s Housing Curbs Will Remain ‘Tight,’ Shui On’s Lee Says (Bloomberg)

Overnight Media Summary


* News Corp board approved a plan to split the conglomerate in two pieces, separating its lucrative entertainment operations from its publishing business, said a person familiar with the situation.

* OxyContin is set to go off patent next year, but the maker of the heavily abused painkiller is trying to extend its exclusive rights to the drug, arguing that a new version it spent $100 million to develop might curtail abuse.

* No matter how the U.S. Supreme Court rules on the federal healthcare law, states will face huge struggles paying for ballooning health expenses and swelling uninsured populations, a problem that has prompted some states to draft their own overhaul plans.

* Barclays Plc agreed to pay $453 million in fines to U.S. and U.K. regulators after admitting that traders and executives tried to manipulate interest rates tied to loans and financial contracts around the world.

* Google Inc unveiled a new tablet computer called the Nexus 7 that rivals's Kindle Fire in both size and price.

* Research In Motion is expected to report an operating loss Thursday following a decline caused partly by overconfidence in its keyboard devices amid the rise of app-loaded touch-screen smartphones.

* A U.S. financial regulator warned that new rules may be needed to address hidden dangers in reverse mortgages, the special loans that enable cash-strapped seniors to borrow against the equity in their homes.

* Delaware's legislature on Wednesday passed a law that could make the state the first to open its population to a full range of legal online gambling, including Internet blackjack, poker and slot games.

* The brother of convicted Ponzi scheme operator Bernard Madoff will plead guilty to criminal charges, marking the first time a family member has admitted guilt since the fraud came to light more than three years ago.

* Xstrata Plc and Glencore International Plc agreed on Wednesday to revise a key element of their landmark merger, shifting the focus now to whether Glencore is willing to sweeten the price to quell a shareholder rebellion over terms of the deal.

* Spanish-owned banks aren't the only ones under pressure to fortify themselves against Spain's crumbling economy. Foreign banks with big Spanish operations also find themselves in a tough position and with few options.

* U.S. securities regulators accused hedge-fund manager Philip Falcone of putting his own interests, including Manhattan townhouses, a security detail and other trappings of a "lavish lifestyle," ahead of investors in his firm, Harbinger Capital Partners.

* European leaders embark on talks Thursday over steps they hope will begin to lift doubts about the survival of the euro, amid heavy skepticism in financial markets.

* Americans by a wide margin favor President Barack Obama's new policy of halting deportations of many young illegal immigrants brought to the U.S. as children, a new poll shows.

* Italy's Parliament approved a landmark overhaul of the country's labor law on Wednesday, boosting Prime Minister Mario Monti's position ahead of a critical summit of European leaders in Brussels.




William Hague, the British foreign secretary, wants to launch a comprehensive audit of the impact of European Union law on Britain this summer, an exercise that could fuel a Conservative Party drive to repatriate powers from Brussels.


Glencore is ready to walk away from its $58 billion merger with Xstrata if a group of dissident shareholders led by the Qatari sovereign wealth fund do not drop their demands for a much higher premium.


Twitter is preparing to introduce new measures to reduce the visibility of "hate speech" or "trolling" on the site.


U.S. congressional negotiators struck a deal on a two-year bill to fund transport projects, defying the political gridlock that has consumed Capitol Hill on many issues in an effort to maintain government support for the country's ailing infrastructure.


A slowdown at Standard Chartered in the second quarter has raised questions over whether the emerging market bank's winning streak is coming to an end.


Google sought to leapfrog rivals such as Apple and Microsoft on Wednesday as it unveiled a prototype of a pair of "smart" glasses designed to carry out many of the functions currently done on a smartphone, such as sharing pictures and accessing information.


Barclays' $450 million settlement with UK and U.S. regulatory authorities for misconduct and attempted manipulation of the London interbank offered rate has prompted Bob Diamond, its chief executive, and three of his key lieutenants to waive their potential bonuses for this year "to reflect our collective responsibility as leaders.



- Roughly six years after the U.S. housing market began its longest and deepest slide since the Great Depression, home sales and an increase in sales prices indicate that the market is recovering.

- Peter Madoff, the younger brother of the convicted fraudster Bernard Madoff, is expected to plead guilty to securities fraud, according to a court filing made by prosecutors on Wednesday.

- With its wireless Nexus Q home media player, Google Inc is resisting the accepted wisdom that consumer electronics products can no longer be built in the United States.

- Google Inc sees the promise in hardware. The focus on hardware is a strategic shift for the company as it aims to create additional revenue from Google-branded devices, while protecting its core search business as competitors hover.

- Barclays Plc will pay over $450 million in regulatory deal. The British bank struck a deal to resolve accusations that it tried to manipulate key interest rates, the first settlement in a sprawling global investigation.

- News Corp appears to be moving closer to dividing into two entities, one that would include its lucrative entertainment assets and a smaller one featuring its newspapers.

- The first prescription diet pill in 13 years to gain Food and Drug Administration approval, Belviq, gives the roughly one-third of American adults considered obese a new option.

- Spain and Cyprus may be the current locus of European anxiety, but many other banks are in a weakened state, cut off from money markets because investors do not trust them.




- With two bodies pulled from the wreckage of Elliot Lake's Algo Mall, Dalton McGuinty's government is set to begin a grim review of whether Ontario's own emergency-response processes undermined the ultimately fruitless rescue mission.

Report in the business section:

- Reversing a year of rising optimism, Canadian and U.S. chief financial officers are suddenly more downbeat on the prospects for the economy and their own companies, according to a quarterly survey by Deloitte being released Thursday.


- MacDonald, Dettwiler & Associates Ltd may have finally got the government monkey off its back with the $875-million acquisition of a California satellite manufacturer.


- Canadian military police officers have been cleared of wrongdoing by a commission that investigated politically explosive allegations of prisoner torture in Afghan jails and concluded the cops were kept in the dark.


European Economic Update

  • Spain Harmonised CPI 1.9% - higher than expected. Consensus 1.8%. Previous 1.9%.
  • Sweden Retail Sales 0.4% m/m – higher than expected. Consensus 0.1% m/m. Previous -0.2% m/m.
  • Sweden Trade Balance 9.8B – higher than expected. Consensus 5.0B. Previous 4.7B.
  • Germany Unemployment (Change) 7K – higher than expected. Consensus 3K. Previous 0K.
  • Norway unemployment 2.4% - higher than expected. Consensus 2.3%. Previous 2.3%.
  • UK GDP (Q1 revised) -0.3% - in line with expectations. Consensus -0.3%. Previous -0.3%.