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Frontrunning: January 14

  • U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
  • Al Qaeda claims French attack, derides Paris rally (Reuters)
  • Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
  • How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee  (BBG)
  • ECB’s bond plan is legal ‘in principle’ (FT)
  • Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
  • DRW to acquire smaller rival Chopper Trading (FT)
  • Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)
  • Paris Attacker Amedy Coulibaly’s Path to Terror (WSJ)
  • Nerves Rattled in U.S. Equities as S&P 500 Volatility Turns Ugly (BBG)
  • Russian finance minister warns on spending as crisis deepens (Reuters)
  • BofA Said to Oust 150 Hedge Fund Clients Under New Rules (BBG)

 

Overnight Media Digest

WSJ

* White House adviser John Podesta will take on a senior advisory role in Hillary Clinton's emerging presidential bid after he leaves the administration in February - another sign that Clinton will launch a 2016 campaign. (http://on.wsj.com/1IsWt2k)

* A surge of oil from outside of the Middle East flooded global energy markets. The worldwide thirst for crude did not keep up. OPEC stood by as prices fell and then fell more. Welcome to the world of oil in 2015 - a repeat in surprising ways of the story 30 years ago. (http://on.wsj.com/1IuEbhk)

* For years, the United States has ceded more and more of its manufacturing to low-cost corners of the global economy. Some companies now want to come home. (http://on.wsj.com/1FTrbDZ)

* The man who last week murdered four Jewish hostages in a kosher grocery and shot down a police officer nursed deep resentment against French law enforcement. (http://on.wsj.com/1z9NDoP)

* The World Bank cut its outlook for global growth Tuesday, saying a strengthening U.S. economy and plummeting oil prices will not be enough to offset deepening trouble in the eurozone and emerging markets. (http://on.wsj.com/1IJ3xX2)

* MetLife Inc is challenging the federal government's decision to subject the insurer to stricter oversight, setting up the biggest test yet for regulators responsible for protecting the U.S. financial system from another crisis. (http://on.wsj.com/1AZqlTf)

* The U.S. Supreme Court on Tuesday adopted a borrower-friendly interpretation of a federal law that gives consumers the right in some circumstances to unwind certain mortgage loans. (http://on.wsj.com/1swJxou)

* Adidas AG plans to sharply ramp up endorsement deals with U.S. pro football and baseball players in the next few years, as the German sportswear maker tries to gain traction in the American market. (http://on.wsj.com/1yafvZZ)

* Caesars Entertainment Corp largest unit is preparing to file for bankruptcy protection as soon as Thursday. (http://on.wsj.com/1C5gYhC)

* Alibaba Group Holding Ltd said on Wednesday it had bought a controlling stake in a Chinese Internet marketing firm AdChina, in a move aimed at expanding its advertising business. (http://on.wsj.com/1BZm413)

 

FT

Plunging oil prices pushed Britain's inflation rate to its lowest level since 2000 and with further declines inevitable in the months ahead, the Bank of England suggested not to consider raising interest rates in the near future.

UK's Ministry of Defence will be forced to make more significant troop cuts unless the next government agrees to maintain real-term increases to the defence budget. New figures show rising costs of huge new military equipment programmes such as the replacement of Britain's nuclear deterrent.

Britain's Local Government Association, which represents all but two of the 375 councils in England and Wales, say the government has left them nearly 5 billion pounds ($7.59 billion) short of the funds they need to provide extra school places over the next decade for the country's rising population.

 

NYT

* MetLife Inc sued a panel of regulators led by the Treasury secretary to fight its designation as "systemically important," making it the first financial company to go to court over the issue since the government started singling out so-called too-big-to-fail institutions in an effort to stem any future financial crises. (http://nyti.ms/1z7KFkI)

* Ocwen Financial Corp, the subprime mortgage servicing firm that has already been under intense regulatory scrutiny in New York State, is now entangled with a California regulator in a dispute that complicates the company's ability to operate in that state. (http://nyti.ms/1DX7nuK)

* Ryanair Holdings Plc, the largest shareholder of the Irish airline Aer Lingus Group Plc, said it expected the parent of British Airways to make another takeover bid for Aer Lingus as soon as this week. (http://nyti.ms/1yhRXiN)

* Even with oil prices continuing to plummet and oil companies decommissioning drilling rigs every day, the Energy Department projected that domestic crude production would continue to rise in 2015, although growth would slow. (http://nyti.ms/1wY1OYa)

* In President Obama's latest move using executive authority to tackle climate change, administration officials will announce plans this week to impose new regulations on the oil and gas industry's emissions of methane, a powerful greenhouse gas, according to a person familiar with Obama's plans. The administration's goal is to cut methane emissions from oil and gas production by up to 45 percent by 2025 from the levels recorded in 2012. (http://nyti.ms/1xYwlJl)

* President Obama on Wednesday will ask the Federal Communications Commission to pre-empt state laws that restrict communities' ability to expand high-speed Internet access to underserved areas. (http://nyti.ms/1yhSrFP)

* Tesla Motors Inc Chief Executive Elon Musk urged traditional automakers to step up their efforts at electrifying automobiles, saying that with gasoline prices hovering in the $2 a gallon range, high fuel prices can no longer be expected to drive consumers toward alternatives. (http://nyti.ms/1yhSAcm)

 

Canada

THE GLOBE AND MAIL

** The Bank of Canada is acknowledging for the first time that the world may be facing a prolonged oil-price slump, casting a dark shadow over the country's economic prospects. (http://bit.ly/1xYQn6B)

** Ottawa will spend as much as C$100 million to safeguard Canadian government computers after a Chinese state-backed hacker broke into the National Research Council's system last summer. The 2015 budget is expected to help underwrite the bill for upgrading network security. (http://bit.ly/1KIKHD2)

** Insolvent fashion chain Mexx Canada is liquidating all of its 95 stores in the wake of overall mixed results among retailers during the holiday selling season and heightened competition. (http://bit.ly/1IvuKOC)

NATIONAL POST

** The Conference Board of Canada said a recession in Alberta is on the way, given that many large oil and gas producers have pared back their spending plans for the coming year and some have announced layoffs. (http://bit.ly/1AP7sjg)

** At least 21 of Ontario's 75 school boards ignored the public sector wage freeze in 2013 and gave pay increases to their directors of education, according to figures compiled from the sunshine list of public sector workers paid over C$100,000 a year. (http://bit.ly/1u5LmUT)

** Canadian oil sands giant Suncor Energy Inc said Tuesday it is axing 1,000 jobs and C$1-billion in capital spending in response to crashing oil prices. (http://bit.ly/1sxiyZN)

 

Hong Kong

SOUTH CHINA MORNING POST

-- Two-thirds of young Hongkongers do not want to work across the border in China as many have doubts over the mainland's quality of life and rule of law, a survey has found. (http://bit.ly/1yhfznU)

-- Chief Executive Leung Chun-ying claimed on Monday that there was significant information indicating that foreign powers were behind the organisation of the Occupy Central movement, but he did not provide substantial evidence to support the claim. (http://bit.ly/1xY74PD)

THE STANDARD

-- Businesswoman Solina Chau Hoi-suen said she will consider running in the election for chief executive in 2017 although her good friend Li Ka-shing said through a spokesman that she was only making a joke. (http://bit.ly/1u2TTNQ)

-- Limited supply and higher prices of new homes are drawing more buyers to the secondary market, according to property agents. (http://bit.ly/1wX3hy7)

HONG KONG ECONOMIC JOURNAL

-- Amid stronger dollar, Hong Kong and other Asian emerging markets are witnessing investing funds continue to flow into U.S. assets but no massive outflows, said Anita Fung, chief executive of HSBC Hong Kong.

 

Britain

The Times

Dalton Philips, the outgoing boss of WM Morrison owned up to strategic errors in his failed efforts to turn around the supermarket chain's fortunes after being sacked yesterday. (http://thetim.es/1xm8XR9)

E.ON has become the first of Britain's Big Six energy firms to cut its household bills following pressure from the chancellor, as the price of oil continues to plummet. (http://thetim.es/1CgYg74)

The Guardian

UK inflation unexpectedly halved in December to the lowest level on record as the sharp drop in global oil prices fed through to petrol pumps and the supermarket price war cut consumers shopping bills. (http://bit.ly/1svUXIR)

The World Bank has warned of the risk of the eurozone sliding into permanent stagnation and urged the European Central Bank to embark on a money-creation programme to boost growth. (http://bit.ly/1IIhHHW)

The Telegraph

The UK economy is in danger of falling into deflation, the Bank of England's Governor warned as data showed that inflation had fallen to a 14-year low. (http://bit.ly/1AYoldT)

The Bank of England has been accused of inconsistency for allowing banks to hide their reliance on financial life support if they run into trouble. Fitch Ratings said the Bank's decision to waive rules forcing struggling banks to disclose how they are being propped up by emergency liquidity assistance (ELA) could disadvantage investors and see them withdraw funds from banks.(http://bit.ly/1u35ffe)

Sky News

The Office for National Statistics (ONS) measured consumer price inflation (CPI) at 0.5 percent in December - its joint lowest level on record - slowing from a rate of 1 percent in the previous month. (http://bit.ly/1wWUD2q)

Shantex, a Chinese manufacturer and exporter of textile accessories, is among a pack of potential bidders for Phase Eight, which has been put up for sale by its private equity backers. (http://bit.ly/1z75dtF)

The Independent

J Sainsbury Plc's has announced it will cut 500 jobs - in a move that comes as part of the latest round of money-saving measures in the supermarket industry. (http://ind.pn/1Ce14lp)

Bakery chain Greggs Plc has beaten profit forecasts for the second time in a month following "very strong" Christmas sales - sending shares up more than 8 percent to a record high. (http://ind.pn/14vA2uj)

 

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Retail sales for December at 8:30--consensus down 0.1%
Business inventories for November at 10:00--consensus up 0.3%
Beige Book to be released at 14:00

ANALYST RESEARCH

Upgrades

ARM Holdings (ARMH) upgraded to Market Perform from Underperform at Bernstein
Arch Capital (ACGL) upgraded to Outperform from Neutral at Macquarie
BlackRock (BLK) upgraded to Buy from Neutral at Goldman
CNA Financial (CNA) upgraded to Outperform from Neutral at Macquarie
Cirrus Logic (CRUS) upgraded to Sector Perform from Underperform at Pacific Crest
DTS, Inc. (DTSI) upgraded to Buy from Neutral at B. Riley
Duke Realty (DRE) upgraded to Outperform from Market Perform at Wells Fargo
Endurance Specialty (ENH) upgraded to Outperform from Neutral at Macquarie
GameStop (GME) upgraded to Outperform from Underperform at Pacific Crest
Garmin (GRMN) upgraded to Sector Perform from Underperform at Pacific Crest
Monster Beverage (MNST) upgraded to Outperform from Market Perform at Cowen
Mosaic (MOS) upgraded to Outperform from Market Perform at BMO Capital
Oaktree Capital (OAK) upgraded to Outperform from Market Perform at Keefe Bruyette
Omega Healthcare (OHI) upgraded to Market Perform from Underperform at Wells Fargo
Pearson (PSO) upgraded to Neutral from Sell at Goldman
Philips (PHG) upgraded to Neutral from Underperform at Exane BNP Paribas
Progressive (PGR) upgraded to Neutral from Underperform at Macquarie
Range Resources (RRC) upgraded to Overweight from Equal Weight at Barclays
The Fresh Market (TFM) upgraded to Overweight from Neutral at JPMorgan
WisdomTree (WETF) upgraded to Buy from Neutral at Goldman

Downgrades

ACE Limited (ACE) downgraded to Neutral from Outperform at Macquarie
AXIS Capital (AXS) downgraded to Neutral from Outperform at Macquarie
Allstate (ALL) downgraded to Underperform from Neutral at Macquarie
Argo Group (AGII) downgraded to Underperform from Neutral at Macquarie
Aspen Insurance (AHL) downgraded to Underperform from Neutral at Macquarie
CDW Corporation (CDW) downgraded to Neutral from Buy at Goldman
Chesapeake (CHK) downgraded to Underweight from Equal Weight at Barclays
Commerzbank (CRZBY) downgraded to Sell from Neutral at Goldman
Continental Resources (CLR) downgraded to Equal Weight from Overweight at Barclays
Corporate Office Properties (OFC) downgraded to Market Perform at Wells Fargo
Credit Suisse (CS) downgraded to Neutral from Overweight at HSBC
Devon Energy (DVN) downgraded to Equal Weight from Overweight at Barclays
Douglas Emmett (DEI) downgraded to Neutral from Buy at Mizuho
F5 Networks (FFIV) downgraded to Equal Weight from Overweight at Barclays
Foot Locker (FL) downgraded to Sell from Neutral at Goldman
Franklin Resources (BEN) downgraded to Neutral from Buy at Goldman
HCP (HCP) downgraded to Market Perform from Outperform at Wells Fargo
Halcon Resources (HK) downgraded to Underweight from Equal Weight at Barclays
Insulet (PODD) downgraded to Neutral from Buy at Sterne Agee
JPMorgan (JPM) downgraded to Underweight from Neutral at HSBC
KB Home (KBH) downgraded to Neutral from Outperform at Credit Suisse
KB Home (KBH) downgraded to Neutral from Positive at Susquehanna
Kosmos (KOS) downgraded to Equal Weight from Overweight at Barclays
Marathon Oil (MRO) downgraded to Equal Weight from Overweight at Barclays
Medley Management (MDLY) downgraded to Market Perform at Keefe Bruyette
Navigators (NAVG) downgraded to Underperform from Neutral at Macquarie
RSP Permian (RSPP) downgraded to Equal Weight from Overweight at Barclays
Rambus (RMBS) downgraded to Neutral from Overweight at JPMorgan
Realty Income (O) downgraded to Market Perform from Outperform at Wells Fargo
Red Hat (RHT) downgraded to Sell from Neutral at Goldman
Resolute Energy (REN) downgraded to Underweight from Equal Weight at Barclays
SandRidge Energy (SD) downgraded to Underweight from Equal Weight at Barclays
Tech Data (TECD) downgraded to Sell from Neutral at Goldman
Travelers (TRV) downgraded to Underperform from Neutral at Macquarie
TrueCar (TRUE) downgraded to Market Perform from Outperform at Cowen
Valspar (VAL) downgraded to Neutral from Outperform at RW Baird
Verizon (VZ) downgraded to Hold from Buy at Evercore ISI
Viacom (VIAB) downgraded to Sell from Buy at Citigroup
W. R. Berkley (WRB) downgraded to Underperform from Neutral at Macquarie
Waddell & Reed (WDR) downgraded to Neutral from Buy at Goldman
Whiting Petroleum (WLL) downgraded to Equal Weight from Overweight at Barclays
Xilinx (XLNX) downgraded to Sector Perform from Outperform at Pacific Crest

COMPANY NEWS

Ocwen Financial (OCN) said that it is fully cooperating with the California Department of Business Oversight to resolve an administrative action

dated October 3
Datawatch (DWCH) announced that it will reduce its sales representatives by 20% and forecast $800,000 in charges associated with that reduction
GameStop (GME) reported total holiday SSS down 3.1%, forecast Q4 SSS down 2.5% to down 1% and FY14 SSS up 3%-4%
Mohawk (MHK) said it would acquire IVC Group for $1.2B
JetBlue (JBLU) reported preliminary December traffic up 5.6%

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Linear Technology (LLTC), Progress Software (PRGS)

Companies that matched consensus earnings expectations include:
CSX (CSX), Nord Anglia (NORD), DragonWave (DRWI)

Stryker (SYK) sees Q4 adjusted EPS $1.43-$1.45, consensus $1.46, sees FY14 EPS $4.72-$4.74, consensus $4.75, sees FY15 EPS negatively impacted by 20c
Shire (SHPG) targets $10B in organic product sales by 2020
GameStop (GME) backs Q4 EPS view of $2.08-$2.24, consensus $2.16, backs FY14 EPS view of $3.40-$3.55, consensus $3.49
CSX (CSX) still sees double-digit EPS growth in 2015
Fluidigm (FLDM) sees Q4 revenue approximately $33.4M, consensus $33.33M, sees FY14 revenue approximately $116.4M, consensus $116.27M, sees FY15 revenue $142M-$149M, consensus $149.02M

NEWSPAPERS/WEBSITES

Tesla (TSLA) CEO Musk says Q4 sales in China fell significantly, WSJ reports
RBS (RBS) has shortlisted Sarasin, DBS consortium for Coutts Intl sale, Reuters reports
Caesar's (CZR) unit expected to file own Chapter 11 bankruptcy petition, WSJ reports
Apple (AAPL) sues Ericsson (ERIC) over patent royalty rates, Bloomberg reports

SYNDICATE

Barracuda Networks (CUDA) files to sell 5.49M shares for holders
CorpBanca (BCA) files automatic mixed securities shelf
Hudson Pacific (HPP) 11M share Secondary priced at $31.75
New Media (NEWM) files to sell 7M shares of common stock