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Frontrunning: February 23

  • Tsipras Tamed as Economists Declare Greece Loses Austerity Fight (BBG)
  • Greece readies reform plans to first sign of leftist unrest (Reuters)
  • Yellen Faces Congress Amid Direst Threat to Fed Since Dodd-Frank (BBG)
  • The war must go on: Kiev says cannot withdraw heavy weapons as attacks persist (Reuters)
  • Ukraine fears spread of war after blast in eastern city (Reuters)
  • Denmark Dismisses Report It Could Consider Capital Controls (BBG)
  • Deadline Nears on Homeland Security Funding Impasse (WSJ)
  • Gross Fund Hurt by Oil’s Plunge Amid Bets on Energy Bonds (BBG)
  • Turkish military invades Syria to evacuate soldiers, relocate tomb (Reuters)
  • Rising Franc Upends Daily Life in Swiss Borderlands (WSJ)
  • U.S. Banks Hoard $2 Trillion of Ultra-Safe Bonds (BBG)
  • Local bankers emerge as Fed ally in fight against audit bill (Reuters)
  • UK Banks Slash Ranks Of Millionaire Pay Deals (Sky)
  • As ‘Spoof’ Trading Persists, Regulators Clamp Down (WSJ)
  • Canada's Valeant to buy Salix in $10.1 billion deal (Reuters)
  • Pope gets away from Vatican to work on correcting 'defects' (AP)

 

Overnight Media Digest

WSJ

* The fledgling GOP-controlled Congress returns to the Capitol just days before its first major fiscal deadline as a battle over President Barack Obama's immigration policies has set up a showdown on whether to fund the Department of Homeland Security. (http://on.wsj.com/1B3VuEw)

* Switzerland's decision last month to lift the cap on the franc is disturbing everyday transactions in the country's border areas. (http://on.wsj.com/1w0tCuQ)

* Corporations and the government must be "true partners" in fighting computer hackers, or breaches like the one at Sony Pictures Entertainment last year will grow more common, President Barack Obama said earlier this month. A detailed look at the attack on the Sony Corp unit shows that could be a tall order. (http://on.wsj.com/1GjGQsH)

* Valeant Pharmaceuticals International Inc said on Sunday it would buy Salix Pharmaceuticals for about $10 billion, a return to its big deal-making ways after a failed bid for Botox maker Allergan Inc last year. (http://on.wsj.com/1zZJ3Ed)

* Spoofing, a bluffing tactic traders use to manipulate prices of anything from stocks to futures, is illegal under the 2010 Dodd-Frank law. Exchanges and regulators have only recently begun clamping down. (http://on.wsj.com/1weLxns)

* George Soros, Michael Milken and David Bonderman are among investors benefiting from early bets on a red-hot sector: young companies developing drugs that fight cancer by using the body's immune system. (http://on.wsj.com/1zZJ3Ed)

* The Xiali sedan, once a status symbol in China, is now an emblem of the struggles of domestic versus foreign brands such as Volkswagen and Chevrolet that now offer less expensive vehicles. (http://on.wsj.com/1zZJuhD)

 

FT

British Ministers have set aside 2 billion pounds ($3.08 billion) to cover potential write-downs in the value of existing student loans in this financial year alone following an increase in the rate of graduates' being unable to repay, according to Treasury documents.

Dubai-based private equity group Abraaj Capital acquired 25 percent stake in Turkey's online retailer Hepsiburada. The deal was valued more than $400 million.

Boutique investment bank Rothschild considers paying its 2014 bonuses early with a view to avoid payment of extra taxes that might be levied if Labour comes back to power.

Stuart Gulliver, the chief executive of HSBC Holdings Plc was drawn into a tax evasion scandal after it was claimed that he had saved millions of dollars from the taxman in a Panamanian company through its Swiss private bank.

 

NYT

* In a high-profile suit set to go to trial this week, a jury will pass judgment about whether Ellen Pao suffered discrimination. (http://nyti.ms/1zZIev6)

* After years of being treated as an interesting side business, autos have become the latest obsession for Silicon Valley, with Apple Inc assigning about 200 engineers to work on electric vehicle technology and Google Inc saying it envisions the public using driverless cars within five years.(http://nyti.ms/1zyqOGL)

* To repair its relationships in the music world, Pandora has created a division to work with labels and artist managers, opened its vast databanks, and begun experimenting with artist promotions.(http://nyti.ms/1DMukSW)

* Fox News host Bill O'Reilly has taken to the airwaves to fight back against accusations that he misled audiences with stories about his war reporting earlier in his career.(http://nyti.ms/1DMus4X)

* With rents surging as the Manhattan office market rebounds, many companies are looking to cut costs, and one way to do that is by trimming personal space.(http://nyti.ms/1EGURQg)

* Wielding the weapon of his pen, President Obama this week is expected to formally reject a Republican attempt to force construction of the Keystone XL oil pipeline. But in stopping the transit of petroleum from the forests of Alberta to the Gulf Coast, Obama will be opening the veto era of his presidency.(http://nyti.ms/1BDJkmP)

* Valeant Pharmaceuticals International Inc, the acquisitive Canadian pharmaceutical company, has agreed to pay $10.4 billion for Salix Pharmaceuticals Ltd, or $158 a share in cash. Including debt, the transaction is valued at about $14.5 billion.(http://nyti.ms/1Lw59qk)

 

Canada

THE GLOBE AND MAIL

** The Harper government's push to deliver a balanced budget despite the burden of low oil prices has attracted fresh attention to a potential stockpile of federal cash: a multi-billion-dollar taxpayer stake in the auto business. The government's remaining 73.4 million shares in General Motors are now worth more than $3.40 billion in total, thanks to the combined effect of a solid stock price and a weakened Canadian dollar. (http://bit.ly/18fGjgk)

** The federal government is rejecting calls for more independent oversight of Canada's national security agencies even as it speeds passage of legislation that would give sweeping new powers to spies and police in the name of fighting terrorism. Parliament will vote Monday night on the Anti-Terrorism Act after the Conservatives limited second-reading debate for the legislation to three days. The bill will be sent to a Parliamentary committee for scrutiny. The Tories want the controversial legislation to become law before the summer begins. (http://bit.ly/1DJttUL)

** Health officials say a 19th case of measles has been confirmed in Quebec. Public health officials at a news conference on Saturday would not confirm whether the new case is a child or an adult, nor whether it is linked to Quebec's previous 18 cases. The source of the outbreak for the first 18 cases has been traced to Disneyland, California. (http://bit.ly/1za9l6z)

** Valeant Pharmaceuticals International Inc is back in major deal-making mode with the all-cash $10.4 billion agreement to acquire gastrointestinal disorders specialist Salix Pharmaceuticals Ltd. (http://bit.ly/1EHJK9y)

NATIONAL POST

** Nova Scotia's largest newspaper has locked out its unionized printing plant employees after contract negotiations failed to reach an agreement. Thirteen press operators and mechanics at the Halifax Chronicle Herald were locked out Saturday, the company said in a news release. It said the employees had turned down a proposal from management. (http://bit.ly/1DN6ab3)

** The federal government has sweetened the deal for would-be natural gas exporters with new tax measures, but the industry is still fretting about feasibility of West Coast projects amid a deteriorating LNG price environment. (http://bit.ly/1ABbaNF)

 

Hong Kong

SOUTH CHINA MORNING POST

- China's over-the-counter (OTC) equity market may get a fresh boost with a much anticipated regulatory nod to insurance funds looking to invest in start-ups. According to two insurance industry officials, several insurers are studying the OTC market as a new investment channel and insurers plan to invest in some of the start-ups listed on the market. (bit.ly/1vZGaCW)

- Hong Kong fashion designers look set to benefit from this year's budget, with the government expected to offer the sector HK$200 million ($25.8 million) in promotion and scholarships in the hope of nurturing young talent in Hong Kong, according to a government source. It would be the first time the government dedicated a set sum to the fashion industry in its annual budget. (bit.ly/1EkPDLO)

THE STANDARD

- A savings fund providing backbone to fight off future challenges is expected to be laid out in Wednesday's budget. The fund, due to be announced by Financial Secretary John Tsang Chun-wah, will provide resources to face problems posed by the aging population and other difficulties. (bit.ly/1vZJ9LA)

- Hong Kong developers rolled out their home sales plans for the Year of the Goat, and agents expect a more active first quarter compared with last year. New World Development will launch six residential projects, with some 2,100 homes in total. (bit.ly/17oIhKt)

HONG KONG ECONOMIC JOURNAL

- HSBC Holdings Plc , which is overshadowed by allegations that its Swiss private bank helped clients to dodge taxes, is expected to post a seven percent drop in yearly profit at $21 billion, according to median forecast by brokerages.

HONG KONG ECONOMIC TIMES

- The number of Hong Kong people migrating to western countries including the United States, Canada, and Australia, totalled 6,900 in 2014, down 9 percent from a year earlier, the government's data showed. Immigration consultancy Centaline said emigration enquiry jumped 40 percent and the number of application increased as much as 10 percent.

Britain

The Times

NEXT RBS CHAIRMAN MUST MEET CHANCELLOR'S APPROVAL

The leading candidate to become the next chairman of Royal Bank of Scotland will have to meet the chancellor to discuss his or her vision for the bank before formally receiving the role. (http://thetim.es/1AyXDpH)

CHANCELLOR BREAKS HIS SILENCE OVER HSBC TAX SCANDAL

George Osborne has broken his silence over the tax scandal surrounding HSBC Holdings Plc by saying that it should be left to the courts to deal with any wrongdoing. The chancellor spoke out after claims that he was ducking questions over the bank and why there had been only one prosecution after allegations of tax evasion through its Swiss subsidiary. (http://thetim.es/1vqnf9b)

The Guardian

SWISS ACCOUNT SECRET OF HSBC CHIEF STUART GULLIVER REVEALED

Stuart Gulliver, the HSBC Holdings Plc chief executive who has vowed to reform the crisis-hit bank, sheltered millions of pounds in a Swiss account through a Panamanian company and remains tax domiciled in Hong Kong. Leaked files show that the Derby-born Gulliver held about 5 million pounds ($7.69 million) in a Swiss account. (http://bit.ly/17K6Gda)

MPS CALL FOR OFGEM TO CRACK DOWN ON ENERGY NETWORK COSTS

The energy watchdog, Ofgem, has come under fire from MPs for exposing consumers to higher bills by failing to crack down on industry costs. The Commons energy and climate change committee said new price caps for National Grid and other power distribution companies, intended to keep down the costs of distributing and transmitting gas and electricity, were too generous. (http://bit.ly/1DIhoix)

The Telegraph

P&O CELEBRATES HANDOVER OF ITS BIGGEST SHIP

P&O Cruises on Sunday celebrated the handover of the biggest addition to its fleet. The final instalment of the 473 million pounds Britannia was 5 percent cheaper than expected because of the strength of sterling against the euro. The original budget for the 141,000-tonne cruise liner, with accommodation for 3,600 passengers and 1,400 crew, had been 500 million pounds. (http://bit.ly/1EkvAxa)

GREECE READIES LIST OF REFORMS TO DODGE BANKRUPTCY

The Greek government will put forward plans to root out tax evasion and overhaul the country's labour laws in a bid to convince international creditors it should be granted a vital extension of its bailout programme. Athens is due to present a series of proposals to its international creditors formerly known as the Troika, in return for a four-month bailout reprieve which will help avert bankruptcy in the stricken country. (http://bit.ly/17oyV1b)

Sky News

POLICE ASSESSING AL SHABAAB UK MALL THREATS

Islamist militants have released a video in which they appear to call for terrorist attacks on some of the busiest shopping areas in the UK and the United States. U.S. authorities have said they are taking the threats seriously. (http://bit.ly/1vZmqPJ)

JACK STRAW SUSPENDED OVER 'CASH FOR ACCESS'

Jack Straw has been suspended from the Labour Party over claims of a "cash for access" scandal. The former foreign secretary, along with Tory MP Malcolm Rifkind, were secretly filmed by the Daily Telegraph in a joint investigation with Channel 4's Dispatches programme apparently offering to use their influence in return for money. (http://bit.ly/18f73xt)

The Independent

APPLE SUED FOR ALLEGEDLY POACHING BATTERY ENGINEERS FROM ELECTRIC CAR FIRM

A123 Systems makes batteries for electric cars and claims that Apple Inc has hired its staff. The accusations come amid claims that Apple is planning an electric car of its own. (http://ind.pn/1zsTlOb)

COLLAPSE IN NEW HOMEBUILDING HEAPS PRESSURE ON MINISTERS

The number of new homes being built collapsed in the second half of last year. There were only 29,800 new housing starts in England in the final quarter of 2014, the Communities Department reported. The news will be a grave embarrassment for ministers who have been claiming that the construction industry is booming. (http://ind.pn/17jbqqj)

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Chicago Fed national activity index for January at 8:30--consensus is 0.05
Existing home sales for January at 10:00--consensus down 1.8% to 4.95M rate
Dallas Fed manufacturing activity index for February at 10:30--consensus -4.0

ANALYST RESEARCH

Upgrades

Colgate-Palmolive (CL) upgraded to Buy from Neutral at Citigroup
Computer Task Group (CTG) upgraded to Buy from Neutral at B. Riley
IMS Health (IMS) upgraded to Overweight from Equal Weight at Barclays
LabCorp (LH) upgraded to Outperform from Neutral at Credit Suisse
LabCorp (LH) upgraded to Overweight from Neutral at Piper Jaffray
MedAssets (MDAS) upgraded to Buy from Neutral at SunTrust
New Gold (NGD) upgraded to Neutral from Sell at Roth Capital
Penn National (PENN) upgraded to Buy from Neutral at BofA/Merrill
Teleflex (TFX) upgraded to Overweight from Equal Weight at Barclays

Downgrades

Boeing (BA) downgraded to Sell from Neutral at Goldman
Century Communities (CCS) downgraded to Neutral from Overweight at JPMorgan
CyberArk (CYBR) downgraded to Underweight from Neutral at JPMorgan
DirecTV (DTV) downgraded to Hold from Buy at Brean Capital
Enerplus (ERF) downgraded to Neutral from Buy at BofA/Merrill
GP Strategies (GPX) downgraded to Neutral from Buy at B. Riley
Interactive Brokers (IBKR) downgraded to Market Perform at Keefe Bruyette
MRC Global (MRC) downgraded to Neutral from Outperform at RW Baird
Precision Castparts (PCP) downgraded to Neutral from Buy at Goldman
Quest Diagnostics (DGX) downgraded to Underperform from Neutral at BofA/Merrill
Rio Tinto (RIO) downgraded to Neutral from Buy at UBS
Salix (SLXP) downgraded to Neutral from Overweight at Piper Jaffray
Spectrum (SPPI) downgraded to Neutral from Buy at Roth Capital

Initiations

Axalta Coating (AXTA) initiated with a Buy at KeyBanc
BofI Holding (BOFI) initiated with a Buy at DA Davidson
CSX (CSX) initiated with an Overweight at JPMorgan
Canadian National (CNI) initiated with a Neutral at JPMorgan
Canadian Pacific (CP) initiated with an Overweight at JPMorgan
Ensign Group (ENSG) initiated with an Outperform at RBC Capital
Entellus Medical (ENTL) initiated with a Buy at BofA/Merrill
Entellus Medical (ENTL) initiated with an Overweight at Piper Jaffray
Flex Pharma (FLKS) initiated with a Buy at Cantor
Flex Pharma (FLKS) initiated with a Buy at Jefferies
Flex Pharma (FLKS) initiated with a Buy at Roth Capital
Flex Pharma (FLKS) initiated with an Outperform at JMP Securities
Flex Pharma (FLKS) initiated with an Overweight at Piper Jaffray
Kansas City Southern (KSU) initiated with an Overweight at JPMorgan
LDR Holding (LDRH) initiated with a Buy at Brean Capital
Norfolk Southern (NSC) initiated with an Underweight at JPMorgan
Presbia (LENS) initiated with a Buy at Jefferies
Union Pacific (UNP) initiated with a Neutral at JPMorgan
Washington Trust Bancorp (WASH) initiated with a Neutral at Compass Point

COMPANY NEWS

Valeant (VRX) confirmed acquisition of Salix (SLXP) for $158 per share, or a total enterprise value of approximately $14.5B
Polypore (PPO) agrees to sell company for $60.50 per share in cash to Asahi Kasei. Immediately prior to Asahi Kasei's acquisition of Polypore, 3M (MMM) will acquire the assets of Polypore's Separations Media segment for approximately $1B and Asahi Kasei will receive the cash proceeds from the asset sale
New Residential (NRZ) to acquire Home Loan Servicing (HLSS) for $18.25 per share
Globe Specialty Metals (GSM), Grupo FerroAtlántica agree to $3.1B combination
DISH (DISH) announced President and CEO Joseph Clayton to retire March 31. DISH Co-founder and Chairman Charles Ergen, who has previously served as DISH’s President and CEO, will succeed Clayton in those roles
Apple (AAPL) to invest EUR 1.6B in new European data centers

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
DISH (DISH), Tower Semiconductor (TSEM), KLX Inc. (KLXI), Pacific Drilling (PACD)

HSBC (HSBC) reports FY14 EPS 69c, compared to 84c a year ago
Tower Semiconductor (TSEM) sees Q1 revenue $255M give or take 5%, consensus $224.03M
KLX Inc. (KLXI) suspends financial guidance
Valeant (VRX) reports Q4 EPS $2.58 vs. $2.15 in Q413, expects Q1 cash EPS of at least $2.30 per share
State Street (STT) says legal accrual does not affect Q4, FY14 results

NEWSPAPERS/WEBSITES

21st Century Fox (FOXA), Discovery (DISCA) held preliminary merger talks, AFR reports
Google (GOOG) reaches preliminary agreement with Italian regulators, WSJ reports
McDonald's (MCD) under pressure to raise hourly pay as Wal-Mart (WMT) sets bar, Reuters reports
J&J (JNJ) considers Cordis sale with Cardinal (CAH) the leading suitor, Bloomberg says
U.S units of Deutsche Bank (DB), Santander (SAN) seen failing stress tests, WSJ reports
Investors should hold on to E.W. Scripps (SSP), Barron's says
American Airlines (AAL) shares could continue 50% higher, Barron's says

SYNDICATE

Higher One (ONE) withdraws mixed securities shelf
LinnCo (LNCO) files to sell common shares, no amount given
Momenta (MNTA) enters $75M At-The-Market equity sales agreement with Stifel
QTS Realty Trust (QTS) files to sell 8.7M shares of common stock
Ultra Clean (UCTT) files to sell 1.44M shares of common stock for holders