Frontrunning: September 16

Frontrunning: September 16
  • Summers Quit Fed Quest After Democrats Spurned Obama Favorite (BBG)
  • Geithner Still Not Interested in Fed Chair Slot (WSJ)
  • Gross’s Trade Sours as Bonds Lose Faith in Fed Guidance (BBG)
  • Bob Diamond calls for bank rules shake-up (FT)
  • Russia says may be time to force Assad’s foes to talk peace (Reuters)
  • Iran Dials Up Syria Presence (WSJ)
  • Kerry Seeks to Sell Syria Deal (WSJ)
  • Shutdown of Japan’s Last Nuclear Reactor Raises Power Concerns (BBG)
  • Emerging Stocks Rise to 3-Month High as Bonds Gain on Fed (BBG)
  • Bernanke’s Maradona swerve hits bonds (FT)
  • Chili’s to Install Tabletop Computer Screens (WSJ)
  • China rejects interference in Hong Kong, ‘thoughtless’ British remarks (Reuters)
  • Twitter Outshines Facebook With Earlier Focus on Mobile (BBG)
  • After Boardwalk Fire, Jersey Shore Fete in Peril (WSJ)
  • Indian Inflation Unexpectedly Quickens Before Rajan Review (BBG)
  • Costa Concordia ‘parbuckling’ gets under way (FT)

Overnight Media Digest


* Lawrence Summers pulled out of the contest to succeed Ben Bernanke as Fed chairman after weeks of public excoriation, forcing President Obama to move further down the list of contenders to head the central bank.

* Fed officials will face at least three sources of economic uncertainty when they gather Tuesday and Wednesday: rising U.S. interest rates, unsettling events abroad and another battle in Washington’s long-running budget war.

* After a yearlong rally, the U.S. housing market is showing signs of cooling as higher prices and interest rates, a slowdown in investor purchases and shortages of homes for sale weigh on one of the economy’s brightest sectors.

* KKR co-founder Henry Kravis said Japan is starting to show signs of growth and that there is a greater potential for deals in the world’s third-largest economy than there has been in the firm’s eight-year history there.

* Drug makers are rallying to a class of drugs that, if they succeed, could be the first treatments to target breast and ovarian cancers tied to the genetic mutations known as BRCA 1 and BRCA 2.

* As editor and part-owner of, Bonnie Fuller is attempting to lure young, female readers with celebrity and entertainment news and articles ranging from relationship advice to style tips.

* Chili’s Grill & Bar, the casual-dining chain owned by Brinker International Inc, plans to say Tuesday it will add tabletop computer screens at most of its U.S. restaurants.

* Vodafone has snatched control of German Internet and cable company Kabel Deutschland despite concerns that some shareholders would hold out for a higher price.

* Keeping track of business contacts and syncing them among various sites and devices can be a major hassle. Several software programs aim to make it easier.

* Huntington Ingalls, the U.S. Navy’s largest shipbuilder, said it faces a delay in securing a $4 billion design contract for a new aircraft carrier in a move that highlights the budget pressures and shifts in procurement policy that are vexing military contractors.


Carmaker Chrysler intends to file for its initial public offering this week after majority owner Fiat and the healthcare trust that owns the rest of the U.S. company failed to agree a market price in a long-running dispute.

Cooper Tire & Rubber’s $2.5 billion deal to sell itself to India’s Apollo Tyres met a roadblock after an arbitrator on Friday pointed out that the deal had been agreed without the consent of workers at two U.S. plants.

Vodafone is looking at acquisitions in India for when changes to merger rules there allow a shake-up in the country’s fragmented telecoms market, the UK-based network provider’s chief executive in India has said.

Hong Kong’s flag carrier Cathay Pacific has gotten caught up in an increasingly public battle with Qantas Airways and China Eastern Airlines about plans to launch a low-cost airline in the Chinese territory.

Former Barclays Chief Executive Bob Diamond has criticised regulators’ lack of progress in finding ways to safely wind down failing financial giants.


* On Sunday, the Obama administration celebrated its successes in combating the recession, while acknowledging the difficulties that remain: while the corporate economy has rebounded strongly, the middle class and its aspirants continue to feel the squeeze of high unemployment and sluggish wage growth.

* Investors and deal makers hope that Twitter’s stock sale will help the once-soaring tech sector take flight again. Analysts have estimated that Twitter, the social network, could be valued at more than $10 billion and raise hundreds of millions of dollars, making it the biggest technology IPO since Facebook.

* Made-in-Taiwan chips are major components in many of the world’s PCs, smartphones, cameras and other gadgets. Why, then, has chip making lost its allure? Many semiconductor companies in Taiwan struggle with low profit margins or even lose money. At the same time, Silicon Valley giants like Google and Apple, whose wizardry would be impossible without the continuing innovations of the semiconductor industry, are sitting on so much cash they do not know what to do with it.

* The coal industry, feeling threatened by federal efforts to promote wind and solar power, has opened a counterattack by opposing President Obama’s nomination of a renewable electricity advocate to head the federal agency with jurisdiction over power lines.

* On Monday, Cumulus Media Inc, which operates 525 radio stations, will announce a deal with Rdio, a subscription music service from the founders of Skype, that will give Cumulus an online outlet and help Rdio compete against more established players like Spotify.



* The battle for the heart of Toronto is shaping up to be a war of wordsmiths. In concurrent nomination events on Sunday, the Liberal Party selected Chrystia Freeland while the New Democratic Party picked Linda McQuaig as their candidates for an as-yet unscheduled by-election in the downtown riding of Toronto Centre. Freeland and McQuaig will go head to head in the race to replace Bob Rae.

* Quebec’s Liberal Leader is daring the Parti Québécois government to call an election over its secular charter as divisions intensify within the province, and with the rest of Canada, over a proposed ban on religious symbols in the public sector.

* Nova Scotia’s Liberal party outlined its plan on Sunday to improve health care in the province, promising to reduce the number of district health authorities from 10 to two and to meet the national standard of a six-month wait for hip and knee replacement surgeries.

Reports in the business section:

* The federal and Ontario governments will contribute about C$135 million (about $131 million) to an investment Ford Motor Co will make in its Oakville, Ontario, operations that will secure the future of the company’s only Canadian assembly plant and 3,000 jobs into the next decade.

* General Motors of Canada Ltd and the union at the automaker’s Cami Automotive plant in Ingersoll, Ontario have reached a deal that freezes wages for the next four years, but will end the use of lower-paid supplementary workers at the plant, which is one of the company’s most productive factories in North America.


* The Canadian government has quietly abandoned any hope of getting back millions of dollars misappropriated by a former public servant, newly released documents show. A Public Works employee stationed in the German city of Koblenz transferred C$3.3 million of government money into three personal bank accounts. The employee made 18 transfers to banks in the Netherlands, Luxembourg and Belgium between April and June of 2004.

* The Minister of Public Safety intends to discuss a series of jailbreaks with the boss of Corrections Canada after a second convicted murderer escaped from a minimum-security prison in just over a week, the minister’s spokesman said on Sunday. During a headcount on Saturday night, guards at a Laval, Quebec, prison realized Hells Angel René Charlebois was missing.

* The federal government continues to blast Quebec’s controversial Charter of Values, with Multiculturalism Minister Jason Kenney saying it approaches “Monty Python-esque absurdity.” “I think people have a hard time understanding how a Jewish doctor wearing a kippa or a hospital worker wearing a turban gets in the way of their work, their responsibilities or dealing with the public,” Kenney told CTV’s Question Period on Sunday. “It just doesn’t make sense.”


* The expected tapering this week of the U.S. Federal Reserve’s $85 billion bond buying binge would come as a great relief to Canada’s central bankers. By winding down their quantitative easing, Fed chairman Ben Bernanke and company would signal the world’s largest economy is finally making deep tracks toward sustained growth.



— More than 1,000 stranded cruise liner guests have been flown home after a ship carrying 2,300 people, including 1,659 passengers, was detained in South Korea over a dispute about a $58 million contract between two Chinese companies.


— China’s money markets are unlikely to see another fund squeeze in September amid expectations of good capital inflows and injection of the finance ministry’s tax revenues into the markets in the month, a commentary by this newspaper said.

— China’s new rules for initial public offerings (IPOs) will focus on protection of retail investors’ interest. Regulators are revising such rules after they suspended IPOs late last year to support the sagging domestic market.


— China Futures Co has become the first commodity futures firm to win regulatory approval to sell mutual funds.

— The Shenzhen Stock Exchange is investigating insider trading during restructuring and “blind speculation” in line with recent regulatory move to tighten the supervision of markets.


— Peking University Cancer Hospital clarified its request for the blood of 100 female virgins, saying it was necessary for an HPV (Human Papillomavirus) study. The request, which appeared on online bulletin board systems at area universities, attracted criticism for promoting virginity worship and demeaning women.


– The 2013 China-Arabian Country Trade Fair opened in the northern Chinese city of Yinchuan on Sunday and will last until Thursday.

Fly On The Wall 7:00 AM Market Snapshot



AstraZeneca (AZN) upgraded to Buy from Sell at Nordea
Barclays (BCS) upgraded to Buy from Reduce at Nomura
Blackstone (BX) upgraded to Buy from Neutral at BofA/Merrill
Bristol-Myers (BMY) upgraded to Overweight from Neutral at JPMorgan
Dominion (D) upgraded to Buy from Neutral at ISI Group
Health Net (HNT) upgraded to Buy from Hold at Jefferies
Huntsman (HUN) upgraded to Buy from Hold at Jefferies
Molina Healthcare (MOH) upgraded to Buy from Hold at Jefferies
Novo Nordisk (NVO) upgraded to Overweight from Underweight at Barclays
Sanofi (SNY) upgraded to Overweight from Equal Weight at Barclays
Teleflex (TFX) upgraded to Outperform from Market Perform at Raymond James


Arkansas Best (ABFS) downgraded to Hold from Buy at Deutsche Bank
EZchip (EZCH) downgraded to Perform from Outperform at Oppenheimer
Gigamon (GIMO) downgraded to Market Perform from Outperform at Raymond James
GlaxoSmithKline (GSK) downgraded to Equal Weight from Overweight at Barclays
Novartis (NVS) downgraded to Underweight from Equal Weight at Barclays
Oaktree Capital (OAK) downgraded to Neutral from Buy at BofA/Merrill
Pioneer Natural (PXD) downgraded to Hold from Buy at Topeka
Telecom Italia (TI) downgraded to Sell from Neutral at Citigroup
Under Armour (UA) downgraded to Neutral from Positive at Susquehanna


AmREIT (AMRE) initiated with an Add at Capital One
BE Aerospace (BEAV) initiated with a Buy at Citigroup
DDR Corp. (DDR) initiated with an Add at Capital One
EVERTEC (EVTC) initiated with a Buy at BofA/Merrill
Endocyte (ECYT) initiated with a Buy at Brean Capital
Kimco Realty (KIM) initiated with a Strong Buy at Capital One
Ramco-Gershenson (RPT) initiated with a Neutral at Capital One
Regency Centers (REG) initiated with an Add at Capital One
Saul Centers (BFS) initiated with an Add at Capital One
Third Point Reinsurance (TPRE) initiated with a Buy at BofA/Merrill
Weingarten Realty (WRI) initiated with a Strong Buy at Capital One


Eastman Kodak (EKDKQ) entered into Registration Rights Agreement with Blackstone (BX)
Northern Dynasty (NAK) reported Anglo American (AAUKY) withdrew from Pebble Project
GlaxoSmithKline (GSK), Genmab received FDA breakthrough designation for Arzerra
Steven Madden (SHOO) set October 1st as new distribution date for 3-for-2 stock split
Nielsen (NLSN) and Revionics signed multi-year global strategic alliance


Companies that missed consensus earnings expectations include:
Globecomm (GCOM)


  • Five years after the darkest days of the 2008 crisis, investors are tiptoeing back into financial stocks, lured by the promise that rising interest rates will revitalize pinched profit margins at banks and insurers, the Wall Street Journal reports
  • Microsoft (MSFT) executives on Thursday are hosting the company’s first major meeting with financial analysts in two years. Intense questioning seems all but assured following a string of moves that left investors puzzling over their spreadsheets. Investors, already on edge about Microsoft’s middling recent financial performance and unsure about its strategy, are impatient for answers, the Wall Street Journal reports
  • Former Treasury Secretary Geithner is still not interested in being the next Federal Reserve head, sources say, after frontrunner Summers withdrew his name from consideration, Reuters reports
  • Top decision makers in South Korea’s $7.64B fighter jet tender have briefed the president on the outcome of an assessment process and told her that Boeing’s (BA) F-15 Silent Eagle was the sole eligible bid, sources, Reuters reports
  • Fed officials will gather this week to decide on policies that will unfold over the next two to three years without knowing who will lead the institution during that time, threatening to weaken the central bank’s policy message by leaving the succession unsettled just as it considers scaling back record accommodation, Bloomberg reports
  • Apple’s (AAPL) new iPhone 5s gives a glimpse of future products that may be in store from company. A new motion-sensor chip inside lays the groundwork for wearable-computing products, while a fingerprint sensor opens more opportunities to make the smartphone a tool for making purchases at stores, according to technology analysts who study Apple, Bloomberg reports


Barrick Gold (ABX) could double
Scripps Networks (SNI) could rise as much as 30%
Computer Sciences (CSC) could rise 25% or more
CST Brands (CST, VLO) could rally 20%
Twitter IPO could be worth $12B


AMSC (AMSC) files to sell $30M of common stock
CST Brands (CST) files to sell 15.08M shares of common stock for holders
Cavco Industries (CVCO) files to sell 1.87M shares of common stock for holders
EveryWare Global (EVRY) 1.75M share Secondary priced at $11.50
First Citizens Banc (FCZA) files to sell $25M of depositary shares
ING U.S. (VOYA) files to sell $100M of common stock for holders

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