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Frontrunning: March 27

  • Google's new CFO to make $70 million (WSJ)
  • Senate passes Republican budget with deep safety net cuts (Reuters)
  • With Yemen strikes, Saudis show growing independence from U.S. (Reuters)
  • Banks Slash Dividends as Loans Sour From Beijing To Pearl River (BBG)
  • North American Railroads Caught by Speed of Crude-Oil Collapse (BBG)
  • Japan’s Zero Inflation a Setback for Abenomics (WSJ)
  • Cooperman Says U.S. Seeks Information About Omega Trades (BBG)
  • Fed's Top Cop Gets Grilled About Leaks (BBG)
  • London Home Prices Gain on Demand for Cheapest Districts (BBG)
  • Apple's Tim Cook will give away all his money (Reuters)
  • ABN Amro Initial Offering Is Delayed Amid Pay, Probe Queries (BBG)
  • Deep in the Rust Belt, Regional Banks Fill Industrial Niche (WSJ)

 

Overnight Media Digest

WSJ

* Google's incoming CFO, Ruth Porat, will receive a $5 million signing bonus plus $65 million worth of restricted stock, making her one of the highest paid CFOs. (http://on.wsj.com/192Cif1)

* Toyota broke a two-year silence on a revamped manufacturing process - built on sharing components among vehicles - that it says will produce half its vehicles by 2020 and slash costs. (http://on.wsj.com/1Bw7kUl)

* Pemex has landed its first major investment since an energy overhaul opened the sector to private players. BlackRock and First Reserve will put up about $900 million for a 45 percent stake in a pipeline project. (http://on.wsj.com/1D4b1Xn)

* Hewlett-Packard Co is nearing a deal to sell control of its data-networking business in China to Tsinghua Unigroup Ltd, according to people familiar with the matter. (http://on.wsj.com/1M8EnYV)

* Brazil's state-run oil firm Petroleo Brasileiro SA said that it appointed Luciano Coutinho, head of the country's development bank, as its new chairman. (http://on.wsj.com/1Ng1Moe)

* German auto maker Mercedes-Benz says its coming offering will appeal to existing pickup owners looking for greater luxury and comfort than now available from midsize pickups from Toyota, General Motors and others. (http://on.wsj.com/1IBORdD)

 

FT

Swiss-based Edmond de Rothschild Group will issue a cease and desist order to the French financial adviser Rothschild and Cie for unfairly using its family name. The Swiss company said that Paris Orleans SA, the parent of Rothschild and Cie, has unfairly referred to itself as the "parent of the Rothschild Group".

Chancellor George Osborne rejected advice from the Foreign and Commonwealth Office while deciding to join China's Asia Infrastructure Bank. Officials in China and the UK had warned Osborne that his decision would alienate allies from Japan and the US. The chancellor raised his decision at the meeting of the National Security Council, which was approved by the Prime Minister.

The UK Government abandoned plans to extend rights of the builders to convert offices into homes after a backlash from London boroughs, business leaders and the Mayor of London, Boris Johnson. The rules to convert offices to homes had been relaxed in 2013 for a three year period.

MPs called the Financial Conduct Authority a 'dysfunctional' institution in a 83-page report indicating that the UK regulators failings were serious enough to require special actions. MPs said that the FCA must compete a detailed inquiry on the culture and governance of the regulator.

 

NYT

* A recent internal report from Citigroup's cyberintelligence center warned bank employees of the threat of attacks on the networks and websites of big law firms. The report, issued last month, said it was reasonable to expect law firms to be targets of attacks by foreign governments and hackers because they are repositories for confidential data on corporate deals and business strategies. (http://nyti.ms/1M8Q4in)

* Oil prices rose sharply on Thursday amid concerns that fighting in the Arabian Peninsula between a Saudi-led coalition and Houthi rebels in Yemen could disrupt supplies. (http://nyti.ms/1M8QKUF)

* Entertainment network HBO is strengthening its relationship with Vice, a media company and news organization. It said on Thursday that it would broadcast a daily half-hour Vice newscast. The program is to run five days a week for 48 weeks a year. Richard Plepler, chief executive of HBO, said it would have its debut this year. (http://nyti.ms/1M8RhGk)

* The House overwhelmingly approved sweeping changes to the Medicare program on Thursday in the most significant bipartisan policy legislation to pass through that chamber since Republicans regained a majority in 2011. The legislation, approved in the House by a vote of 392 to 37, embodies a rare and significant agreement negotiated by Speaker John Boehner and the House Democratic leader, Representative Nancy Pelosi of California. (http://nyti.ms/1M8RNUR)

* South Korea on Thursday became the latest American ally to announce its intention to join the Asian Infrastructure Investment Bank despite Washington's qualms about the Chinese-led regional development bank. (http://nyti.ms/1M8ScXh)

 

Canada

CHINA SECURITIES JOURNAL

- Wan Feng, chairman of New China Life Insurance , said its premium income is expected to achieve single-digit growth in 2015. Its vice chairman Chen Guogang said the company would maintain a cautious stance and would continue to invest in fixed income projects, not derivatives projects.

CHINA DAILY

- China and Sri Lanka have ended a stalemate over a $1.4 billion port project in the island nation's capital of Colombo. During meetings with Chinese leaders in Beijing on Thursday, Sri Lankan President Maithripala Sirisena promised to continue the infrastructure project, which was suspended by the country's current administration.

21st CENTURY BUSINESS HERALD

- The main targets of China's thirteenth five-year plan are to boost economic transformation and upgrading, and to adjust to the new normal, said Guo Lian, official of National Development and Reform Commission.

 

China

THE GLOBE AND MAIL

** The Alberta government plans to raise C$9.746 billion ($7.78 billion) in debt this year, the largest financing it has done in at least 15 years as the province copes with a painful slump in oil prices. (bit.ly/1OCgwQ8)

** The Supreme Court of Canada is scheduled to rule on Friday morning on whether Quebec has the right to obtain records from the now-abolished federal long-gun registry or whether Ottawa can destroy the records. (bit.ly/1ICJyLg)

** A hundred Iranians who wish to become business immigrants to Canada have written to Foreign Affairs Minister Rob Nicholson complaining that his office delayed their applications for up to two years because of economic sanctions against Iran. (bit.ly/1xjYBYW)

NATIONAL POST

** Comark Inc, owner of Ricki's, Bootlegger and Cleo, has joined the swelling ranks of homegrown Canadian fashion chains who have filed for bankruptcy protection and are closing some stores. (bit.ly/1BtzePW)

** In a sign of how touchy bilingualism issues can get in New Brunswick, the province's education minister has vowed to take action after learning French and English-speaking students have been travelling on the same school bus. (bit.ly/1CsPHZi)

** Average energy bills in Ontario are set to increase by as much as C$137 a year starting in 2016 due to program changes announced by the Liberal government on Thursday, including a new rebate to help low-income families. (bit.ly/1Nljfdl)

 

Britain

The Times

AA PROMISES TO RESUME DIVIDENDS BY RAISING 1 BLN POUNDS

AA Plc intends to raise almost 1 billion pounds ($1.49 billion) from share and loan sales as it moves to tackle its debt and resume dividend payments. As part of the plan, which was accompanied by a strategic update and the publication of annual profits, the recently listed roadside recovery group said it would raise 200 million pounds from a placement with shareholders. (http://thetim.es/1Gwvund)

MOBILE WAR AS BT OFFERS 4G DEAL FOR 5 POUNDS A MONTH

BT Group Plc has marked its return to the consumer mobile market with a price war after launching a 4G package for 5 pounds a month. It hopes to get a foothold in the mobile market under its own steam before the completion of its 12.5 billion pound takeover of EE. (http://thetim.es/1FNY84d)

The Guardian

CAMERON CONCEDES DEFEAT OVER PUBLICATION OF PRINCE CHARLES'S LETTERS

David Cameron has admitted defeat after the government lost a 10-year battle with the Guardian to keep secret a "particularly frank" cache of lobbying letters written by Prince Charles. Following a supreme court ruling that 27 letters between the heir to the throne and ministers must finally be published under the Freedom of Information Act, the prime minister has told aides to prepare their release. (http://bit.ly/1xD8D7N)

STUDENT CLEARED OF LONDON TERROR CHARGE AFTER PARTIALLY SECRET TRIAL

A man who faced accusations that he was plotting to mount an Islamic State-inspired gun or bomb attack on the streets of London has been acquitted after a highly secretive Old Bailey trial. Erol Incedal, 27, was cleared of preparation of acts of terrorism after a four-week retrial in which large parts of the evidence were heard inside a locked courtroom. (http://bit.ly/1EXxLG0)

The Telegraph

FRED GOODWIN TOLD TO HAND OVER PRIVATE EMAILS IN ROYAL BANK OF SCOTLAND LAWSUIT

Fred Goodwin has been told to disclose personal emails he sent in the run-up to Royal Bank of Scotland Group Plc's 2008 rights issue, as part of a 4 billion pounds court case. The bank's former chief executive, who lost his knighthood over the bank's collapse, is among a number of ex-directors who will have to reveal the private email accounts used to discuss the controversial share sale. (http://bit.ly/1BvOE73)

LIQUIDITY STORM COULD THROW UK INTO CHAOS, BANK OF ENGLAND WARNS

The Bank of England has warned that a global liquidity storm could endanger financial stability if investors suddenly demanded their money back, adding that the threat of a Greek default posed "significant risks" to the UK. (http://bit.ly/1FWx2WV)

Sky News

CO-OP BANK SECURES CHIEF EXECUTIVE UNTIL 2017

The struggling Co-operative Bank will announce that it has struck a deal to keep its chief executive until at least 2017 as it attempts to return to profitability. Niall Booker, a former HSBC Bank Plc executive, has agreed to remain in his post for about two more years amid pressure from regulators for continuity at the helm of the embattled lender. (http://bit.ly/1ydgtjd)

FORMER OFCOM CHIEF TO LEAD BANK BODY OVERHAUL

The former head of the media regulator is to spearhead a plan to overhaul the myriad trade associations which represent Britain's beleaguered banking industry. Ed Richards, who stepped down as chief executive of Ofcom at the end of last year, will be named to his first major post since leaving the regulator. (http://bit.ly/19nN67i)

The Independent

LONDON ARMS FAIR COULD BE USED TO SELL TORTURE INSTRUMENTS, MPS FEAR

MPs fear that some exhibitors at the world's biggest arms fair, to be held in London in September, could try to use the event to promote the sale of instruments of torture. The powerful Arms Export Control Committee had hoped to see the terms of the agreement between the company running Defence and Security Equipment International (DSEI), Clarion Events, and the government before the general election. (http://ind.pn/19W5o0G)

SPORTS DIRECT IS BEING RUN LIKE 'BACKSTREET OUTFIT', MPS SAY

The chairman of Sports Direct International Plc is presiding over a FTSE 100 company run like a "backstreet outfit" where executives made deals behind the board's back, withheld payments to force suppliers and landlords to the negotiating table and failed to consult with staff over the pre-pack administration of its fashion chain USC, according to MPs. (http://ind.pn/1IASrF9)

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
GDP for Q4 at 8:30, consensus 2.4%
University of Michigan's consumer sentiment at 10:00, consensus 92.1
Fed Chair Janet Yellen speaks at San Francisco Fed conference at 3:45

ANALYST RESEARCH

Upgrades

A. Schulman (SHLM) upgraded to Overweight from Sector Weight at KeyBanc
BB&T (BBT) upgraded to Outperform from Market Perform at FBR Capital
Bunge (BG) upgraded to Buy from Neutral at Goldman
Ensign Group (ENSG) upgraded to Outperform from Market Perform at Wells Fargo
Regions Financial (RF) upgraded to Buy from Neutral at Compass Point
SunCoke Energy Partners (SXCP) upgraded to Buy from Neutral at Citigroup

Downgrades

Alkermes (ALKS) downgraded to Neutral from Buy at Citigroup
American Eagle (AEO) downgraded to Sell from Neutral at Goldman
ArcelorMittal (MT) downgraded to Sell from Neutral at Citigroup
Diodes (DIOD) downgraded to Outperform from Strong Buy at Raymond James
EMC (EMC) downgraded to Sector Perform from Outperform at Pacific Crest
Epizyme (EPZM) downgraded to Neutral from Buy at Citigroup
FutureFuel (FF) downgraded Neutral at Roth Capital
GameStop (GME) downgraded to Neutral from Buy at B. Riley
MSC Industrial (MSM) downgraded to Neutral from Outperform at RW Baird
Power Integrations (POWI) downgraded to Market Perform at Raymond James
SanDisk (SNDK) downgraded to Hold from Buy at Evercore ISI
Semtech (SMTC) downgraded to Outperform from Strong Buy at Raymond James
Vantiv (VNTV) downgraded to Reduce from Neutral at SunTrust
WESCO (WCC) downgraded to Neutral from Outperform at RW Baird
World Acceptance (WRLD) downgraded to Underperform from Neutral at Macquarie

Initiations

Arista Networks (ANET) initiated with a Neutral at Guggenheim
Charles Schwab (SCHW) initiated with an Outperform at RBC Capital
Cisco (CSCO) initiated with a Neutral at Guggenheim
ClubCorp (MYCC) initiated with a Buy at Stifel
Colfax (CFX) initiated with a Market Perform at William Blair
Con-way (CNW) initiated with an Outperform at Macquarie
E-Trade (ETFC) initiated with an Outperform at RBC Capital
Esperion (ESPR) assumed with a Buy at Citigroup
F5 Networks (FFIV) initiated with a Buy at Guggenheim
FireEye (FEYE) initiated with a Market Perform at Raymond James
Heartland Express (HTLD) initiated with a Neutral at Macquarie
Infoblox (BLOX) initiated with a Buy at Guggenheim
Jazz Pharmaceuticals (JAZZ) assumed with a Buy at Citigroup
Juniper (JNPR) initiated with a Neutral at Guggenheim
Knight Transportation (KNX) initiated with an Outperform at Macquarie
LabCorp (LH) initiated with an Outperform at JMP Securities
Morgan Stanley says Yahoo (YHOO) attractive way to buy Alibaba
Netgear (NTGR) initiated with a Neutral at Guggenheim
Novavax (NVAX) assumed with a Buy at Citigroup
Quest Diagnostics (DGX) initiated with a Market Perform at JMP Securities
Repsol (REPYY) initiated with an Underperform at Jefferies
Ruckus Wireless (RKUS) initiated with a Buy at Guggenheim
Sonus (SONS) initiated with a Neutral at Guggenheim
TD Ameritrade (AMTD) initiated with a Sector Perform at RBC Capital
The Medicines Co. (MDCO) assumed with a Neutral at Citigroup
Ubiquiti Networks (UBNT) initiated with a Neutral at Guggenheim
Yahoo (YHOO) initiated with an Overweight at Morgan Stanley
Zayo Group (ZAYO) initiated with an Overweight at JPMorgan

COMPANY NEWS

Yahoo (YHOO) approved additional share repurchase program of $2B
RBS (RBS) to sell internationally managed private banking and wealth management unitto UBP SA
Chevron (CVX) sold interest in Caltex Australia
Orexigen Therapeutics (OREX) said the European Commission granted marketing authorization for Mysimba
BlackRock (BLK), First Reserve to acquire equity stakes in PEMEX pipeline projects
GameStop (GME) sees FY software growth 4%-6%. The company also said it sees Q1 SSS growth 2.5%-5.5% 

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
ChinaCache (CCIH), Marathon Patent Group (MARA), Onconova (ONTX), Agile Therapeutics (AGRX), Roka Bioscience (ROKA), Gevo (GEVO), Cara Therapeutics (CARA), Minerva (NERV), OncoGenex (OGXI), Restoration Hardware (RH), Oxford Industries (OXM)

Companies that missed consensus earnings expectations include:
GameStop (GME), Spark Energy (SPKE), Upland Software (UPLD)

Restoration Hardware (RH) sees Q1 EPS 18c-20c, consensus 23c, sees FY15 EPS $2.95-$3.10, consensus $3.00
GameStop (GME) sees Q1 EPS 53c-60c, consensus 66c, sees FY15 EPS $3.60-$3.80, consensus $4.04
PolyOne (POL) targets double digit EPS expansion in 2015

NEWSPAPERS/WEBSITES

Ben Harrington, former M&A and Markets Editor at the Daily Telegraph and current editor of the blog Betaville, said that Shire (SHPG) is weighing a takeover of BioMarin (BMRN)
HP (HPQ) close to deal to sell control of H3C Technologies, WSJ reports
Facebook (FB) to test drone this summer, WSJ reports
Apple (AAPL) secretly acquired Acunu in 2013, Bloomberg reports
PetroChina (PTR) in active discussions to swap Canadian assets, Financial Times reports
Microsoft (MSFT) to push two inexpensive notebooks in mid-2015, DigiTimes reports

SYNDICATE

Applied DNA Sciences (APDN) files to sell common stock, warrants
Central Pacific (cpf) files to sell 7.6M shares of common stock for holders
Corporate Office Properties (OFC) files 3.86M common shares of beneficial interest
Jernigan Capital (JCAP) 5M share IPO priced at $20.00
Knightsbridge Shipping (VLCCF) files to sell 62M shares for holders
Terreno Realty (TRNO) files to sell common, preferred stock
TriplePoint Venture (TPVG) commences offering of 6.5M shares of common stock