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Frontrunning: January 20

  • Obama to focus on middle class in State of Union address (Reuters) - all 4 of them?
  • European Stocks Buoyed by ECB Hopes (WSJ)
  • China's 2014 economic growth misses target, hits 24-year low (Reuters)
  • Federer on Swiss Franc Shock: "Does It Mean I've Got to Win Now?" (BBG)
  • First-time buyers help Christie’s reach record sales (FT)
  • So it was the NSA? U.S. Spies Tapped North Korean Computers Prior to Sony Hack (BBG)
  • Why Chinese Developer Kaisa's Default Risk Has Money Managers Spooked (BBG)
  • Morgan Stanley Misses Estimates on Drop in Bond-Trading Revenue (BBG)
  • Bond Investors Haven't Been This Gloomy Since 2008 -- But Are They Right to Be So Down? (BBG) 100% wrong: bond investors are simply frontrunning central banks
  • Pope says birth control ban doesn't mean breed 'like rabbits' (Reuters)
  • Richest Russians Repatriate Assets as Putin Turns Tax Screw (BBG)
  • Putin Enlists Veteran of 'Much Tougher Times' to Help Contain Ruble Crisis (BBG)
  • Bank Losses From Swiss Currency Surprise Seen Mounting (BBG)
  • Islamic State threatens two Japanese captives in video (Reuters)

 

Overnight Media Digest

WSJ

* U.S. Federal Reserve officials are staying on track to start raising short-term interest rates later this year, even though long-term rates are going in the other direction amid new investor worries. (http://on.wsj.com/1CHSBHr)

* China's economic growth slipped to its weakest level in almost a quarter century in 2014, though growth in the final quarter came in higher than expected, amid nagging problems of overcapacity, a weak housing market and lower global demand. (http://on.wsj.com/1CdTh9d)

* President Obama's proposal for billions of dollars in tax increases and higher government spending, to be outlined in Tuesday's State of the Union address, is reigniting partisan debates about overhauling the tax code and aiding the middle class. (http://on.wsj.com/1xrY9Cp)

* When Goldman Sachs Group Inc arranged an $835 million loan to Banco Espírito Santo SA last summer, it was the result of a concerted, monthslong effort by senior Goldman officials to win business with the large Portuguese company, according to people familiar with the matter. (http://on.wsj.com/1yCgcIS)

* When foreign-exchange broker FXCM Inc was forced to seek a rescue last week following a surprise surge in the Swiss franc, it became quickly apparent that Jefferies Group, which in recent years has honed its skills as a rescuer of firms succumbing to bouts of market turmoil, was best-suited for the job. (http://on.wsj.com/1yGwd1L)

* British authorities said they had closed a nearly two-year-old probe into alleged accounting issues related to Hewlett-Packard Co's $11-billion purchase of UK software company Autonomy in 2011 - representing a home-court victory for Autonomy founder Mike Lynch. (http://on.wsj.com/1ujOah7)

* BP's lawyers plan to argue that the drop in oil prices should weigh into the U.S. fines it faces from the 2010 Gulf oil spill. A trial is set for Jan. 20, and fines could total up to $13.7 billion. (http://on.wsj.com/1zsZI8R)

* The European Union is considering imposing a tax on U.S. Internet companies such as Google Inc. as part of a new plan to build a single digital market across the region, EU digital chief Günther Oettinger said. (http://on.wsj.com/1Cva4Cp)

* Two Wall Street deal makers are starting an activist hedge fund with a collaborative approach to management, hoping that financial backing from chief executives as well as their own experience advising boards under fire will open more doors than the combative stances and sharp missives favored by other activists. Active CEOs that are investing in the fund include Marc Casper of Thermo Fisher Scientific Inc and Stephen Hemsley of UnitedHealth Group Inc. (http://on.wsj.com/1yDhGWa)

 

FT

* UK's biggest energy retailer British Gas reduced household gas prices by 5 percent following Eon's 3.5 percent cut last week. This makes it the second energy company to cut the cost of household gas supplies in less than a week, and is in response to falling wholesale costs.

* Magnus Peterson, founder of Weavering hedge fund, has been found guilty of fraud for $600 million of investors' money by a jury in the Southwark Crown court. He was found guilty on eight counts which included fraud by abuse of position, furnishing false information and forgery.

* Banks and brokers involved in Aviva's planned acquisition of Friends Life Ltd will receive 45 million pounds as fees. The tie-up is expected to cost about 1,500 jobs. These disclosures were made in documents published ahead of shareholder votes on Aviva's all-share takeover.

* The Serious Fraud Office (SFO) has closed its investigation into the ill-fated sale of Autonomy to Hewlett-Packard Co, saying there was not enough evidence to secure a conviction of the software firm's former executives.

 

NYT

* After winning acclaim for one of its original television productions, Amazon.com Inc announced on Monday that it would produce and acquire films for theatrical release and early distribution on its Prime Instant Video service. (http://nyti.ms/1AF3vuV)

* As demand for exports slips and the real estate sector cools, China has been looking to consumers to help pick up the slack. But the country's slowing growth will complicate those plans. (http://nyti.ms/15rLJCS)

* At a remote research center on the Nebraska plains, scientists are using surgery and breeding techniques to re-engineer the farm animal to fit the needs of the 21st-century meat industry. The potential benefits are huge: animals that produce more offspring, yield more meat and cost less to raise. (http://nyti.ms/1yDkpis)

* The World Economic Forum annual meeting in Davos, Switzerland, which begins this week, has been a top venue for controversial conversations over the years. Israelis and Palestinians have debated, for example, and luminaries from the public and private sectors have faced off on big topics like climate change, inequality and gender diversity. (http://nyti.ms/1wn1NMa)

* The Danish monetary authorities lowered interest rates further into negative territory on Monday, seeking to reduce upward pressure on their currency, the krone, just days before a momentous meeting of the European Central Bank. (http://nyti.ms/1ujOEUp)

* The founder of Weavering Capital was convicted on Monday of fraud, forgery and other criminal charges related to the collapse of the hedge fund in 2009, prosecutors said. (http://nyti.ms/1yCgmzO)

* The Serious Fraud Office of Britain said on Monday that it had closed its investigation into suspected accounting and disclosure abuses connected to Hewlett-Packard Co's $11 billion purchase of the British technology company Autonomy. (http://nyti.ms/151525A)

* Societe Generale, one of France's largest banks, is splitting the roles of chairman and chief executive to comply with European rules, it said on Monday. (http://nyti.ms/1J1Fpku)

* The chief executive of Allied Irish Banks Plc, a nationalized lender, is leaving for a similar position at Clydesdale Bank Plc, the Scottish arm of National Australia Bank. (http://nyti.ms/1yCgCig)

 

Canada

THE GLOBE AND MAIL

** The Organization of the Petroleum Exporting Countries is resisting moves to halt the free fall in oil prices, stoking fears of deeper cuts to staffing and spending plans in Canada's energy sector as companies hunker down for a prolonged slump. Lightstream Resources Ltd and CanElson Drilling Corp joined on Monday a growing list of companies that have slashed budgets in response to the roughly 60-percent plunge in oil prices since June last year. (http://bit.ly/1EkCVea)

** The Canadian government signed an order on Monday under the Foreign Extraterritorial Measures Act, barring companies from complying with the requirement that only U.S. steel be used on the project in Prince Rupert, British Columbia, Trade Minister Ed Fast said. (http://bit.ly/1CdpYmV)

** Canadian special forces soldiers are more directly engaged in the fight against Islamic State forces in Iraq than previously thought, with troops on the ground guiding air strikes against targets and using sniper fire to fend off enemy attacks at the front lines. (http://bit.ly/1sVsuwt)

NATIONAL POST

** Toronto Mayor John Tory is poised to unveil his first draft city budget on Tuesday, which will include a property tax hike no higher than 3 percent, including a 0.5 percent levy already approved for the Scarborough subway. (http://bit.ly/15rX5Xu)

** Rob Ford fully emerged as Toronto's de-facto leader of the opposition on Monday, attacking John Tory as a tax-and-spender even as the new mayor positioned himself as the great undoer of Ford-era cuts. Ford accused his successor of "misleading" voters and "spending and spending and spending" after Tory unveiled new transit service. (http://bit.ly/1sVthxt)

** As senators in Washington D.C. prepare to vote on Tuesday on "Buy America" and "no export" amendments for a bill that would approve TransCanada Corp's Keystone XL pipeline, support for the much-debated oilsands line may not be as widespread and deeply felt as previously thought, accordingly to the results of a new poll. (http://bit.ly/1yCR8kI)

 

China

SECURITIES TIMES

- CITIC Securities Co Ltd denied media reports that the company reduced its share holdings right before regulators announced margin trading punishments and was engaged in insider trading, in an official statement published on Tuesday.

CHINA SECURITIES JOURNAL

- China will no longer require pre-approvals for most foreign investment once it adopts a "negative list" approach, the latest attempt by the country to ease inbound investment restrictions, said Sun Jiwen, the spokesman of the Ministry of Commerce on Monday.

SHANGHAI SECURITIES NEWS

- Chinese institutional investors are still holding positive views on the future performance of the stock market despite the sharp drop on Monday, the newspaper wrote in a commentary.

CHINA DAILY

- Contrary to Western portrayals, Uighurs found illegally entering Thailand and Vietnam are not innocent, helpless members of an ethnic minority fleeing suppression in pursuit of freedom, the newspaper said in an editorial. They are religious extremists headed to the forefronts of Islamic Jihad and devotees of the Islamic State group, it added.

 
PEOPLE'S DAILY

- Chinese Communist Party members should maintain their absolute loyalty to the party by acting in line with party rules, the mouth-piece of the party said in a commentary on Tuesday.

 

Britain

The Times

David Cameron insisted that there are "no surprises" in his tax returns, but refused to commit to publishing them. The Tory leader impressed there are "no secrets" about his tax affairs, but would not support plans made by Number 10 in 2012 for the prime minister and senior cabinet ministers to release their personal tax returns. (http://thetim.es/1ukAI2g)

David Cameron told Britain's leading Muslim group it "really has a problem" after it accused ministers of adopting the ideas of the far right. The Muslim Council of Britain had taken issue with the open letter to imams in England, calling on them to do more to turn young Muslims away from radicalisation in the wake of the Paris terror attacks. (http://thetim.es/14ZFF45)

The Guardian

The former chief executive of Tesco Plc, Terry Leahy, has broken his silence on the crisis engulfing the country's biggest retailer by claiming there was a failure of leadership under his successor, Philip Clarke. (http://bit.ly/1CIwcKa)

Government Communications Headquarters bulk surveillance of electronic communications has scooped up emails to and from journalists working for some of the U.S. and UK's largest media organisations, analysis of documents released by whistleblower Edward Snowden reveals. The disclosure comes as the British government faces intense pressure to protect the confidential communications of reporters, MPs and lawyers from snooping. (http://bit.ly/15nU9vK)

The Telegraph

The chief executive of the failed hedge fund Weavering has been found guilty of eight counts of fraud, forgery, false accounting and fraudulent trading, though he was cleared of eight further charges in a London court on Monday almost six years after the collapse of his company. (http://bit.ly/1CdxOgy)

Aviva's 5.6 billion pounds ($8.45 billion) takeover of Friends Life Group Ltd will lead to around 1,500 job losses under plans to generate significant cost savings. (http://bit.ly/1ukKT6R)

Sky News

British Gas is to cut household gas bills by 5 percent, an annual average saving of 37 pounds. The energy firm, owned by Centrica, said the move will benefit 6.8 million customers. (http://bit.ly/1CICCJ9)

Embattled construction group Balfour Beatty Plc will announce that it has poached the finance chief of travel agency Hogg Robinson group Plc as it continues a battle to retain its independence. Balfour Beatty is to name Philip Harrison as its new chief financial officer just days before it discloses the outcome of an investigation into the accounts of its UK construction arm. (http://bit.ly/1BuTi9Q)

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
NAHB housing market index for January at 10:00--consensus 58

ANALYST RESEARCH

Upgrades

Altria Group (MO) upgraded to Outperform from Market Perform at Wells Fargo
Avery Dennison (AVY) upgraded to Overweight from Equal Weight at Barclays
BJ's Restaurants (BJRI) upgraded to Buy from Hold at KeyBanc
Banco Bilbao (BBVA) upgraded to Buy from Neutral at Citigroup
C.R. Bard (BCR) upgraded to Neutral from Underweight at JPMorgan
CME Group (CME) upgraded to Buy from Neutral at Citigroup
Canon (CAJ) upgraded to Hold from Sell at Deutsche Bank
Carrizo Oil & Gas (CRZO) upgraded to Buy from Hold at KeyBanc
Copa Holdings (CPA) upgraded to Overweight from Neutral at JPMorgan
Exelon (EXC) upgraded to Outperform from Market Perform at Wells Fargo
Federal Signal (FSS) upgraded to Buy from Neutral at Global Hunter
Fluidigm (FLDM) upgraded to Outperform from Market Perform at Cowen
MedAssets (MDAS) upgraded to Buy from Hold at Evercore ISI
Micron (MU) upgraded to Positive from Neutral at Susquehanna
Rockwell Collins (COL) upgraded to Overweight from Equal Weight at Barclays
Starz (STRZA) upgraded to Overweight from Equal Weight at Morgan Stanley
T-Mobile (TMUS) upgraded to Conviction Buy from Buy at Goldman
Teck Resources (TCK) upgraded to Neutral from Underperform at BofA/Merrill
Tiffany (TIF) upgraded to Outperform from Market Perform at Wells Fargo
Vermilion Energy (VET) upgraded to Outperformer from Sector Performer at CIBC
Watsco (WSO) upgraded to Neutral from Sell at Goldman

Downgrades

Archer Daniels (ADM) downgraded to Underweight from Neutral at JPMorgan
Ball Corp. (BLL) downgraded to Equal Weight from Overweight at Barclays
CTC Media (CTCM) downgraded to Sell from Neutral at Goldman
Cache (CACH) downgraded to Neutral from Buy at B. Riley
Chubb (CB) downgraded to Neutral from Buy at UBS
Express Scripts (ESRX) downgraded to Neutral from Buy at UBS
Fossil (FOSL) downgraded to Neutral from Overweight at Piper Jaffray
GOL Linhas (GOL) downgraded to Sell from Neutral at Goldman
Intel (INTC) downgraded to Underperform from Market Perform at JMP Securities
Ivanhoe Mines (IVN) downgraded to Neutral from Buy at BofA/Merrill
Jack Henry (JKHY) downgraded to Sell from Hold at Evercore ISI
Luxottica (LUX) downgraded to Outperform from Strong Buy at Raymond James
Northeast Utilities (NU) downgraded to Market Perform from Outperform at Wells Fargo
PAREXEL (PRXL) downgraded to Neutral from Buy at SunTrust
Rexnord (RXN) downgraded to Sell from Neutral at Goldman
Syngenta (SYT) downgraded to Underweight from Equal Weight at Barclays
Taseko Mines (TGB) downgraded to Underperform from Neutral at BofA/Merrill
Time Warner (TWX) downgraded to Equal Weight from Overweight at Morgan Stanley
Viacom (VIAB) downgraded to Underweight from Equal Weight at Morgan Stanley
Wesco Aircraft (WAIR) downgraded to Underweight from Equal Weight at Barclays
Yandex (YNDX) downgraded to Sell from Neutral at Goldman
Zayo Group (ZAYO) downgraded to Neutral from Conviction Buy at Goldman

Initiations

GrubHub (GRUB) initiated with a Sector Perform at RBC Capital
Icahn Enterprises (IEP) initiated with a Neutral at UBS
LendingClub (LC) initiated with a Hold at Stifel
LendingClub (LC) initiated with a Neutral at Citigroup
LendingClub (LC) initiated with a Neutral at Goldman
LendingClub (LC) initiated with a Neutral at Goldman
LendingClub (LC) initiated with an Outperform at BMO Capital

COMPANY NEWS

AT&T (T) reported a $10B charge in Q4 related to pension benefits and network assets
Amazon (AMZN) to produce original movies for theaters, Prime Instant Video
FDA removed partial clinical hold for CytRx's (CYTR) aldoxorubicin clinical trials
Twitter (TWTR) acquired ZipDial, terms not disclosed
Mosaic (MOS) expects 'further business strength' into 2015
The Director of the Serious Fraud Office  closed the SFO's investigation into the sale of Autonomy to the Hewlett-Packard in 2011. In respect of some aspects of the allegations, the SFO has concluded that, on the information available to it, there is insufficient evidence for a realistic prospect of conviction

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Baker Hughes (BHI), First Defiance Financial (FDEF)

Companies that missed consensus earnings expectations include:
iGATE (IGTE), Mercantile Bank (MBWM), Regions Financial (RF), New Oriental Education (EDU)

Michaels (MIK) sees Q4 revenue $1.599B-$1.605B, consensus $1.59B
NTELOS (NTLS) sees FY14 adj. EBITDA at or above mid-point of guidance $128M-$132M
AMCON Distributing (DIT) reports Q1 EPS $2.11 vs. $1.73 last year
Mosaic (MOS) raises Q4 EPS outlook to 83c-88c, consensus 57c
New Oriental Education (EDU) sees Q3 revenue $279.8M-$290M, consensus $292.6M
Unilever (UL) reports Q4 underlying sales growth up 2.1%

NEWSPAPERS/WEBSITES

Google (GOOG) near $1B investment in SpaceX, WSJ reports
DreamWorks (DWA) planning to lay off 'substantial' number of staff, LA Times reports
Yahoo (YHOO) to announce Alibaba (BABA) plans on or before January 27, AP says
Samsung (SSNLF) wants BlackBerry (BBRY) partnership, not takeover, WSJ reports
Google (GOOG) in talks to acquire mobile-pay platform Softcard, WSJ says
Samsung (SSNLF) shares could rise 30%, Barron's says
GoPro (GPRO) shares could drop further, Barron's says
Phillips 66 (PSX) could jump 50%, Barron's says