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Frontrunning: January 23

  • Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
  • Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
  • Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
  • Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
  • U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
  • Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
  • A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)
  • Chinese Chairman of Credit Suisse Venture Is Missing (BBG)
  • Dimon, Blankfein Getting Bigger Cash Bonuses Even While U.S. Bank Rally Fizzles (BBG)
  • Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon (BBG)
  • California Backs Surfers as Billionaire Khosla Risks Property (BBG)
  • Islamic State deadline on Japanese captives passes with no word on fate (Reuters)
  • Boston’s Poverty-Fighting Rosengren Pushes Activist Fed Vision (BBG)

 

Overnight Media Digest

WSJ

* King Abdullah bin Abdulaziz al Saud, who insulated Saudi Arabia from the Islamist and democratic forces roiling the Middle East in the name of stability, died at about age 90. (http://on.wsj.com/1CpNU6Y)

* Comcast Corp's proposed merger with Time Warner Cable Inc and Obama's call for stringent new Internet regulations are testing the cable giant's lobbying power. (http://on.wsj.com/1GF2QCh)

* When Switzerland's central bank shocked markets by scrapping a three-year-old policy limiting the value of the Swiss franc against the euro, the Swiss investment firm Quaesta Capital was among the few that benefited. (http://on.wsj.com/1uoHX3A)

* Carl Icahn joined other activist investors in pushing back against a trend in recent months in which spun-off companies are cloaked with tough takeover defenses. (http://on.wsj.com/1JqtKdf)

* Gas prices appear headed below a nationwide average of $2 a gallon in coming days, and the rapid plunge is beginning to ripple through the U.S. economy in ways both familiar and unpredictable. (http://on.wsj.com/15iQMp2)

* Li Ka-shing's Hutchison Whampoa Ltd said it had agreed to enter into exclusive talks to buy U.K. mobile-phone operator O2 for potentially more than $15 billion. (http://on.wsj.com/1CX5tts)

* Janus Capital Group Inc confirmed that the bulk of the money flowing into the new bond fund of star manager Bill Gross came from Gross himself. On a conference call with analysts on Thursday to discuss the firm's earnings, Janus Chief Executive Dick Weil told participants that Gross had invested "more than $700 million" in his Janus Global Unconstrained Bond fund at the end of 2014. (http://on.wsj.com/1CkJjCT)

* T-Mobile US Inc is giving subprime subscribers another chance amid an escalating battle for customers in the wireless business. The country's fourth-largest wireless carrier said it would extend its best service offers, including financing plans for cellphones that can cost $650 or more, to any buyer who makes at least 12 payments in a row regardless of credit score. (http://on.wsj.com/1CI8yNw)

 

FT

* Telefonica SA is set to agree to a cash deal of 10 billion pounds ($15 billion) to sell O2, its British mobile company, to one of Asia's wealthiest men, Li Ka-shing's Hutchison Whampoa Ltd, the Financial Times reported on Thursday.

* Anglo American is looking to sell a cluster of coal assets in eastern Australia as it tries to boost shareholder returns amid a slump in commodities prices.

* The European Central Bank agreed on Thursday to embark on a quantitative easing programme that will see it buy 60 billion euros ($68.1 billion) worth of government bonds a month from this March until September next year.

* Swedish group Industrivarden said on Thursday its chairman, Sverker Martin-Lof, would leave his position at the group and its companies. The move comes after a jet scandal erupted relating to liberal use of corporate jets by senior staff.

 

NYT

* Federal officials vowed to make more of an experimental drug that showed promise in treating Ebola, but that project has moved slowly. (http://nyti.ms/1CX1XPw)

* Bitcoin, the virtual currency that was once the talk of the financial world, has been taking a beating over the last year with the price tumbling downward. Now two of the biggest boosters of the virtual currency, Cameron and Tyler Winklevoss, are trying to firm up support by creating the first regulated Bitcoin exchange for American customers - what they are calling the Nasdaq of Bitcoin. (http://nyti.ms/1Ckuctg)

* President Barack Obama is proposing a radical change to the 529 college savings plans held by millions of families, which would require those who use them to rethink their approach to college savings. As part of his plan to simplify the tax code and help the middle class, one of the 529 plan's most attractive benefits would be eliminated: Money could no longer be withdrawn tax-free. (http://nyti.ms/1GEZRKa)

* BMW and Volkswagen AG announced a plan on Thursday to install 100 high-speed charging stations on busy corridors this year on the East and West Coasts, like Interstate 95 between here and Boston. The stations will be part of a fast-growing network run by ChargePoint, the nation's largest, and will be compatible with nearly all electric vehicles on the road. (http://nyti.ms/1xHlIah)

* DreamWorks Animation SKG Inc said on Thursday that it would reduce its movie output and lay off 500 employees, or roughly 19 percent of its staff, a retrenchment that follows a string of box-office misfires and two failed merger attempts. (http://nyti.ms/1AWEk7c)

* The Consumer Financial Protection Bureau said that more than 100 former Wells Fargo & Co loan officers and half a dozen from JPMorgan Chase & Co accepted kickbacks, as part of a scheme to steer business to a now defunct title insurance company. The banks agreed to pay about $36 million. (http://nyti.ms/15DcVzo)

* Online Storage Provider Box Inc will be valued at $1.7 billion when it begins trading on Friday, but concerns have been raised within Silicon Valley about the high-flying valuations that some technology darlings have fetched recently. (http://nyti.ms/1yPZO7I)

* Hutchison Whampoa Ltd, one of the flagship companies of the Hong Kong billionaire Li Ka-shing, said on Friday it has agreed to enter exclusive talks to buy O2, the British cellphone carrier owned by the Spanish telecom giant Telefonica SA, in a deal worth roughly $15 billion. (http://nyti.ms/1GF2njF)

* Amazon.com Inc has agreed to buy Annapurna Labs, an Israeli chip developer, for about $350 million, a spokeswoman for Amazon said on Thursday. (http://nyti.ms/1t4sf23)

* Shareholders in Family Dollar Stores Inc voted on Thursday to approve the retailer's $8.5 billion merger with Dollar Tree Inc, leaving the company's unwanted suitor, Dollar General Corp, on the losing side. (http://nyti.ms/1JfHvNI)

 

Canada

THE GLOBE AND MAIL

** Canada's major lenders are so far holding off cutting mortgage rates in the wake of the Bank of Canada's quarter-point interest rate cut, but industry officials predict rates will fall to historic new lows just in time for the all-important spring housing market. (http://bit.ly/15wHwxN)

** The Canadian Broadcasting Corp is banning all outside paid appearances by its on-air journalists, after almost a year of controversy over allegations of potential conflicts-of-interest. (http://bit.ly/1GDBUCU)

** The big breweries that own Ontario's Beer Store are facing an unprecedented threat to their private monopoly. Legal challenges are piling up, the government is promising reforms and everyone from craft brewers to restaurateurs is pushing for the end of this lucrative cartel arrangement. (http://bit.ly/1yB1wLf)

NATIONAL POST

** The Bank of Canada's surprise rate cut this week could result in much quicker and surprising economic growth than many are expecting, market watchers said on Thursday. (http://bit.ly/1uzUVB2)

** Toronto Mayor John Tory found himself under attack on a most unexpected front on Thursday: on financial management, and from the left. The former corporate CEO - who won office by promising a business-like approach at city hall - had won early left-wing praise this week for his first budget, which spends C$75 million in new money on things such as transit and shelters without raising property taxes beyond the rate of inflation. (http://bit.ly/15wHPc0)

** After acknowledging the Treaty 1 Metis land on which he stood, the mayor of Winnipeg took a long, deep breath on Thursday and said racism against Aboriginal people is a big problem in his city. (http://bit.ly/1BjjxgY)

 

China

CHINA SECURITIES JOURNAL

- The People's Bank of China continued to inject money via medium-term lending facilities and open market operations, which means it might not be in a rush to cut reserve requirement ratios (RRR) and the interest rate in 2015, the newspaper said in its commentary.

- China Cinda Asset Management Co and Shanghai State-owned Assets Operation Co said they have jointly issued 200 billion yuan in funds to promote mixed ownership in state-owned companies.

SECURITIES TIMES

- China Securities Depository and Clearing Corp Ltd said it had approved Bank of China and Bank of Communications to undertake settlement business of stock options.

SHANGHAI SECURITIES NEWS

- The New Third Board, China's leading over-the-counter exchange, has seen the number of firms listed rise by 3.4 times and investors five times over the year since its launch.

- China Securities Index Co Ltd plans to launch a "one belt, one road" index on Feb. 16 that will include 79 stocks from sectors such as infrastructure and transport.

CHINA DAILY

- China Railway Corp expects 289 million trips to be made during the country's annual Spring Festival travel peak, while the government will take third-party help to assess the transportation department's performance.

- China may generate the majority of its total energy needs from renewable sources by 2050, capping its coal use at 1.5 billion metric tons by then, Wang Zhongying, director of the China National Renewable Energy Center, told the newspaper.

 

Britain

The Times

Eurozone borrowing costs dived to record lows, the euro fell and shares were pushed higher yesterday in a "textbook reaction" to the European Central Bank's landmark 1.1 trillion euros ($1.25 trillion) stimulus package. Although prices moved favourably as traders cheered the bigger-than-expected move, many remained sceptical that the money-creation splurge would be enough to pull the 19-nation eurozone out of its economic paralysis. (http://thetim.es/1CnLkOY)

George Osborne has told corporate bosses that he can transform Britain into the "go-to western economy" for business if the Tories are re-elected. At a private breakfast with chief executives in Davos, the chancellor said he was committed to more structural reforms, including to the labour market to make it easier for companies to hire and fire. (http://thetim.es/1t3BCzh)

The Guardian

The American private equity fund KKR & Co LP has bought the British train ticket website thetrainline.com, derailing its planned float on the London stock market. Trainline was one of the first companies of the year to announce an initial public offering, which a source familiar with the deal said could have valued the firm at more than 500 million pounds ($750.30 million). (http://bit.ly/1CjT6Jn)

The Duke of York has publicly denied allegations he had underage sex with an American teenager, reiterating and reaffirming previous Buckingham Palace statements rebutting the claims. Prince Andrew's first public response to the claims was made as he addressed an annual reception for 200 guests at the World Economic Forum in Davos, Switzerland. (http://bit.ly/1y4JgVq)

The Telegraph

David Cameron has said a radical transfer of tax-raising powers is the right long-term "resting place" for Scottish devolution as he dismissed Scottish National Party complaints the plans had been watered down and did not go far enough. (http://bit.ly/186PjEe)

Hong Kong tycoon Li Ka-shing is to create a new leader in Britain's mobile phone industry after agreeing to buy O2 for more than 10 billion pounds. Telefonica SA, the owner of O2, will announce a merger with Li's Hutchison Whampoa Ltd on Friday morning. (http://bit.ly/1CjXubt)

Sky News

Npower will become the fourth of Britain's six biggest energy companies to cut gas prices as pressure intensifies on suppliers to pass on the benefit of falling wholesale prices. Sky News has learned that Npower, which is owned by the German utility group RWE AG, will announce that it is cutting its standard gas tariff by more than 5 percent, making it the largest reduction unveiled during the current round of cuts. (http://bit.ly/1Je1GeO)

The furniture chain DFS is to target a valuation of up to 1 billion pounds in a London stock market listing next month that will include a substantial offering to retail investors. The company, which is owned by private equity group Advent International, will say that it wants to raise well over 100 million pounds from the initial public offering and that it will use the proceeds to redeem a 200 million pound bond. (http://bit.ly/1yKRpny)

The Independent

The boss of Royal Mail has claimed that 2015 is the year that "big retailers will realise that quality counts" and opt for its services after rivals City Link and Yodel struggled in the crucial run-up to Christmas. Royal Mail delivered unexpectedly decent festive results, with UK parcels up 4 percent, sending it to the top of the FTSE 100. (http://ind.pn/1untO6E)

Boris Johnson has reportedly paid the overdue taxes to the United States government he previously described as "outrageous" and said he did not intend to pay. All U.S. citizens, including those who live and work outside the country, are obliged to file a tax return and pay US taxes. (http://ind.pn/1yKYR1M)

 

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Markit manufacturing PMI for January at 9:45--consensus 54.0
Leading indicators for December at 10:00--consensus up 0.4%
Existing home sales for December at 10:00--consensus up 3.0% to  5.08M rate

ANALYST RESEARCH

Upgrades

AmSurg (AMSG) upgraded to Overweight from Neutral at Piper Jaffray
Anglo American (AAUKY) upgraded to Neutral from Sell at Goldman
Cypress Semiconductor (CY) upgraded to Neutral from Underweight at JPMorgan
DreamWorks Animation (DWA) upgraded to Overweight from Neutral at Piper Jaffray
E-Trade (ETFC) upgraded to Outperform from Neutral at Credit Suisse
Kate Spade (KATE) upgraded to Buy from Neutral at Mizuho
LinkedIn (LNKD) upgraded to Strong Buy from Market Perform at Raymond James
lululemon (LULU) upgraded to Overweight from Neutral at JPMorgan
Michael Kors (KORS) upgraded to Buy from Neutral at Mizuho
Natural Grocers (NGVC) upgraded to Overweight from Neutral at Piper Jaffray
Nucor (NUE) upgraded to Buy from Neutral at Goldman
ResMed (RMD) upgraded to Buy from Hold at Needham
Ternium (TX) upgraded to Neutral from Sell at Goldman

Downgrades

Access National (ANCX) downgraded to Market Perform from Outperform at Keefe Bruyette
Alamos Gold (AGI) downgraded to Neutral from Buy at BofA/Merrill
Altera (ALTR) downgraded to Market Perform from Outperform at BMO Capital
Avon Products (AVP) downgraded to Market Perform from Outperform at Wells Fargo
Cardinal Financial (CFNL) downgraded to Market Perform at Keefe Bruyette
Century Aluminum (CENX) downgraded to Neutral from Overweight at JPMorgan
Chevron (CVX) downgraded to Neutral from Outperform at Credit Suisse
City National (CYN) downgraded to Market Perform from Outperform at Raymond James
Coca-Cola Femsa (KOF) downgraded to Neutral from Overweight at JPMorgan
DreamWorks Animation (DWA) downgraded to Sell from Neutral at Janney Capital
DreamWorks Animation (DWA) downgraded to Underperform from Market Perform at Cowen
Exxon Mobil (XOM) downgraded to Underperform from Neutral at Credit Suisse
Hercules Offshore (HERO) downgraded to Underperform at Raymond James
Hershey (HSY) downgraded to Hold from Buy at Deutsche Bank
PNM Resources (PNM) downgraded to Hold from Buy at Jefferies
Precision Castparts (PCP) downgraded to Neutral from Buy at Sterne Agee
Precision Castparts (PCP) downgraded to Neutral from Outperform at Credit Suisse
Rentokil (RTOKY) downgraded to Sell from Neutral at UBS
Sallie Mae (SLM) downgraded to Neutral from Buy at Goldman
Travelers (TRV) downgraded to Neutral from Overweight at Atlantic Equities
U.S. Steel (X) downgraded to Neutral from Buy at Goldman
Vale (VALE) downgraded to Neutral from Buy at Goldman

Initiations

Arena Pharmaceuticals (ARNA) initiated with a Sector Perform at RBC Capital
Avolon (AVOL) initiated with an Overweight at JPMorgan
Hortonworks (HDP) initiated with a Market Perform at Cowen
Informatica (INFA) initiated with a Market Perform at Cowen
Kona Grill (KONA) initiated with an Outperform at Oppenheimer
Medivation (MDVN) initiated with a Sector Perform at RBC Capital
Natural Grocers (NGVC) initiated with an Underperform at Wedbush
Orexigen (OREX) initiated with an Outperform at RBC Capital
PTC Therapeutics (PTCT) initiated with an Outperform at RBC Capital
Puma Biotechnology (PBYI) initiated with an Outperform at RBC Capital
Qlik Technologies (QLIK) initiated with an Outperform at Cowen
Rice Energy (RICE) initiated with an Outperform at Imperial Capital
Salesforce.com (CRM) initiated with an Outperform at Cowen
Sarepta (SRPT) initiated with a Sector Perform at RBC Capital
ServiceNow (NOW) initiated with an Outperform at BMO Capital
Sprouts Farmers Markets (SFM) initiated with a Neutral at Wedbush
Stemline (STML) initiated with an Outperform at Cowen
Tableau (DATA) initiated with a Market Perform at Cowen
Teradata (TDC) initiated with a Market Perform at Cowen
The Fresh Market (TFM) initiated with a Neutral at Wedbush
United Natural Foods (UNFI) initiated with an Outperform at Wedbush
United Technologies (UTX) initiated with a Buy at Citigroup
VIVUS (VVUS) initiated with an Outperform at RBC Capital
Whole Foods (WFM) initiated with an Outperform at Wedbush
Workday (WDAY) initiated with an Outperform at Cowen
Zafgen (ZFGN) initiated with an Outperform at RBC Capital

COMPANY NEWS
DreamWorks Animation (DWA) said it will focus its feature production from three films per year down to two. The overall reduction of DreamWorks' feature production output will result in a loss of approximately 500 jobs across all locations and all divisions of the studio. DreamWorks also announced the departure of COO Mark Zoradi
Starbucks (SBUX) named Kevin Johnson as president and COO and said A1 performance was 'exceptional'
Merrimack (MACK) announced resignation of Chief Scientific Officer Ulrik Nielsen, effective January 30
Telefonica (TEF) entered into talks to sell O2 UK to Hutchison Whampoa (HUWHY) for GBP10.25B
Sony (SNE) to delay earnings report due to last year's cyberattack
J. Crew CEO Mickey Drexler to retire from Apple (AAPL) board
Intuitive Surgical (ISRG) sees 2015 procedural growth 7%-10%

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
General Electric (GE), Prosperity Bancshares (PB), Raymond James (RJF), State Street (STT), Western Alliance (WAL), Celanese (CE), BancFirst (BANF), SVB Financial (SIVB), First Internet Bancorp (INBK), Altera (ALTR), Skyworks (SWKS), Infinera (INFN), KLA-Tencor (KLAC), Bryn Mawr Bank (BMTC), Independent Bank (INDB), ResMed (RMD), Polycom (PLCM), Intuitive Surgical (ISRG)

Companies that missed consensus earnings expectations include:
BNY Mellon (BK), Heritage Commerce (HTBK), LeapFrog (LF), Hancock Holding (HBHC), OceanFirst Financial (OCFC), Old Line Bancshares (OLBK), First Financial (FFIN), Digi International (DGII), Capital One (COF), American National Bankshares (AMNB), Uroplasty (UPI)

Companies that matched consensus earnings expectations include:
Starbucks (SBUX), 8x8, Inc. (EGHT), Hexcel (HXL), Microsemi (MSCC), Federated Investors (FII)

Starbucks (SBUX) sees FY15 EPS outlook $3.09-$3.13, consensus $3.13, sees 1H15 EPS at lower end of range. Starbucks sees Q2 EPS 64c-65c, consensus 68c
Skyworks (SWKS) sees Q2 EPS $1.12, consensus $1.04, sees Q2 revenue $750M, consensus $708.72M
Microsemi (MSCC) sees Q2 EPS 64c-68c, consensus 67c
LeapFrog (LF) withdraws guidance for FY15, CFO sees Q4 sales declining

NEWSPAPERS/WEBSITES
NIH, GlaxoSmithKline (GSK), Merck (MRK) launch joint Ebola vaccine test in Liberia, WSJ reports
Google's (GOOG) entrance into telecommunications may not be beneficial, Re/code says
Amazon (AMZN) acquires Annapurna Labs, Re/code reports
Microsoft's (MSFT) Windows 10 unlikely to bring dramatic changes to mobile market, DigiTimes says
Hutchison (HUWHY) could bring in PE firms as minority partners in O2 (TEF) deal, Reuters reports
Airlines unlikely to cut fares despite 'enormous' savings, Reuters reports (JBLU, DAL, UAL, AAL, LUV)

SYNDICATE
Box, Inc. (BOX) 12.5M share IPO priced at $14.00
Dave & Busters (PLAY) files to sell 6M shares for holders
Euronav NV (EURN) IPO raised to 16.26M shares, priced at $12.25
Horsehead Holding (ZINC) 5M share Secondary priced at $12.75
Michaels (MIK) Secondary increased to 18.8M shares, priced at $23.52
Otonomy (OTIC) Secondary increased to 2.55M shares, priced at $29.25
Radius Health (RDUS) 4M share Secondary priced at $36.75
Verastem (VSTM) Secondary increased to 7.25M shares, priced at $6.50
Vitae Pharmaceuticals (VTAE) 3M share Secondary priced at $11.90