Frontrunning: December 4

  • EU Fines Financial Institutions Over Fixing Key Benchmarks (Reuters)
  • Euro-Area Economic Growth Slows as Exports, Consumption Cool (BBG) – someone has a very loose definition of growth
  • Ukraine Officials Scour Globe for Cash as Protests Build (BBG)
  • Oops: Franklin Boosted Ukraine Bet to $6 Billion as Selloff Began (BBG)
  • Japan Plans 18.6 Trillion Yen Economic Package to Support Growth (BBG) – or about 2 months of POMO
  • How Peugeot and France ran out of gas (Reuters)
  • Iran threatens to trigger oil price war (FT)
  • Abe Vows to Pass Secrecy Law That Hurts Cabinet’s Popularity (BBG)
  • Brazil economy turns in worst quarter for 5 years (FT)
  • Australia’s Slowdown Suggests RBA May Need to Do More (BBG)
  • Biden calls for trust with China amid airspace dispute (Reuters)
  • Al Qaeda now America’s friend? U.S., Allies Reach Out to Syria’s Islamist Rebels (WSJ)
  • Heavy Inventories Threaten to Squeeze Clothing Stores (WSJ)
  • Budget Negotiators Seen Near to Deal to Ease U.S. Cuts (BBG)
  • Regulators Set to Approve Toughened ‘Volcker Rule’ (WSJ)
  • Brisk Demand Lifts U.S. Auto Sales (WSJ)

Overnight Media Digest


* U.S. Vice President Joe Biden’s visit to Beijing on Wednesday was long intended to boost trade but instead has become an urgent diplomatic mission.

* Federal regulators are expected next week to approve a toughened version of the so-called Volcker rule, opening a new phase of stricter oversight for Wall Street.

* Forget Internet IPOs: One of the best investments of the past couple of years was a bankrupt airline.

* Big banks have been retrenching from the mortgage business recently, leaving smaller players to pick up larger chunks of business. The midsize and smaller players have grown despite tightening their underwriting standards, much like larger banks have since the financial crisis. But the smaller banks’ capital rules aren’t as stringent as those that make mortgages a costly enterprise for the biggest firms.

* European antitrust authorities are set to hit several banks with heavy fines as soon as Wednesday for allegedly colluding to rig interbank lending rates, people familiar with the matter said.

* Former Tyco CEO Dennis Kozlowski is set for parole early next year following his 2005 criminal conviction and imprisonment for looting the company.

* Apparel chains have heavy inventory loads, raising concern their weak Thanksgiving showing will force bigger markdowns that could hurt fourth-quarter profits.

* November U.S. auto sales ran at their strongest pace in more than six years, aided by sales promotions, but there were also signs that competitive pressure is ratcheting up on Detroit’s auto makers.



Brussels is expected to levy fines on Wednesday
on 10 global banks charged with fixing Euribor, Yen Libor or both. The
EU competition commissioner will announce a decision on the allegedly
formed cartels to rig two global interest rate benchmarks.

British government backed BP in a U.S. ban, which bars the company from
government contracts, calling it “excessive”. The decision in the 2010
Deepwater Horizon oil spill case, affects jobs and pensions of workers
in the United Kingdom, the United States, and elsewhere, it said.

Financial Policy Committee said the Bank of England could ask banks to
disclose capital ratios using standardised risk weights, along with the
ratio based on their internal models.

A high court ruling on
Tuesday said HTC will have to stop the sale of its “One Mini” brand in
the UK as the Taiwanese company was found guilty of infringing Finnish
counterpart Nokia’s patents.

French phone company Iliad is set to
prolong a two-year price war with its rivals by providing 4G services
for 19.99 euros per month, similar to its 3G offers.

has spent 25 million pounds in cutting prices before Christmas, and will
spend a further 50 million in the first quarter of 2014 — a move that
is expected to put pressure on the Big Four supermarkets.



* In a ruling that could reverberate far beyond Detroit, a federal judge held on Tuesday that this battered city could formally enter bankruptcy and asserted that Detroit’s obligation to pay pensions in full was not untouchable.

* At a picturesque century-old factory, Count Anton-Wolfgang von Faber-Castell is the eighth in a long line carrying on the family name in the pencil business. Faber-Castell, the largest maker of wood-encased pencils in the world, illustrates how midsize companies – which account for about 60 percent of the country’s jobs – are able to stay competitive in the global marketplace.

* The FDA allows the sale of some devices to treat small groups of patients without requiring proof that the devices work, or any rigorous study of the medical results.

* Testimony to Parliament from the top editor of The Guardian illustrated the aggressive investigative and spying tactics increasingly faced by news organizations.

* Newsweek, the struggling weekly magazine that ceased print publication last year, plans to turn the presses back on. The magazine expects to begin a 64-page weekly edition in January or February.

* The Illinois legislature on Tuesday ended a day of emotional debate and fierce back-room arm-twisting by passing a deal to shore up the state’s debt-engulfed pension system by trimming retiree benefits and increasing state contributions.

* Jon Horvath has been positioned as a star witness for federal prosecutors in the insider trading trial of Michael Steinberg, his former boss at SAC Capital Advisors. But under questioning by the defense on Tuesday, Horvath, a former analyst at SAC, acknowledged having some memory lapses, potentially undercutting some of his cred

* Edward Lampert, the hedge fund manager who serves as Sears Holdings’ chief executive, remains struggling retailer Sears’ biggest shareholder. But his firm, ESL Partners, has cut the size of its stake, disclosing in a regulatory filing on Tuesday that it now owns 48.4 percent of its shares, down from 55.4 percent.




* Conservative
senators are blocking Liberal efforts to hear the testimony of an
auditor, a partner at Deloitte, who is alleged to have intervened in a
review of Senator Mike Duffy’s expenses at the behest of the Prime
Minister’s Office.

* Toronto Mayor Rob Ford says he had
no idea three men he posed with for a picture at last weekend’s Buffalo
Bills football game had ties to the Hells Angels.

Reports in the business section:

Potash Corp of Saskatchewan is laying off staff and slashing output
capacity in a bid to become a lower-cost producer amid falling prices
and slumping demand from key customers.

* CNOOC Ltd’s
financial performance is being hurt by its purchase of Nexen Inc, a
situation exacerbated by its pledge to Ottawa that it will not reduce
its newly-acquired Canadian staff, the Chinese company’s own leading
analyst says.

* Bank of Montreal’s latest quarterly
results served as a sharp pinch for those who had been lulled into a
slumber by the recent rally in bank stocks.

Despite strong wealth
management earnings, encouraging Canadian loan growth and a solid profit
of $1.1 billion for the quarter, BMO’s results included rising
provisions for bad loans and a deteriorating outlook for U.S. personal
and commercial banking.


* As
Detroit finalizes the terms of the largest public bankruptcy in U.S.
history this week, its across-the-river Canadian neighbor, the city of
Windsor, is boasting a fiscal record the envy of any city its size on
the continent: five years without a tax hike, an eight-figure paydown of
municipal debt, all while weathering the effects of Ontario
manufacturing’s collapse.


Before embarking on a controversial expansion of the Canada Pension
Plan, the Canadian government should consider Australia’s successful
experience closing gaps in retirement savings through mandatory
workplace pensions, according to the authors of a paper published on
Tuesday by the Fraser Institute.

Canada’s finance ministers will
be meeting this month to discuss whether there is consensus to move
ahead with expansion of the Canada Pension Plan.

Tax-loss selling opportunities are slim heading into the last month of
the year, resulting in an especially potent headwind for those unlucky
stocks that have not participated in this year’s market rally.

Ltd, Potash Corp and Barrick Gold Corp are among 10 Canadian stocks
that are bound for bruising in tax-loss selling, according to Pierre
Lapointe, head of global strategy and research at Pavilion Capital
Markets in Montreal.




– The Chinese government will strengthen the position of foreign-invested enterprises by simplifying the examination and approval process for investing abroad, Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, said on Tuesday.


– China will reveal a new national urbanisation plan next year, according to a statement from the Politburo. The plan has reportedly met resistance from local governments as it touches on the redistribution of land revenue between farmers and governments.

– Courts in Central China’s Henan province will end the handcuffing and caging of suspects during trials. Suspects should also be allowed to wear normal clothes rather than prison uniforms while on trial, said Zhang Liyong, president of Henan High People’s Court.


– For a political party, suggesting a strategic vision is important, but of greater importance is a party’s ability to implement that vision, said the paper that acts as the party’s mouthpiece. Concrete steps should be taken to promote reform, said the paper.



The Telegraph


The British billionaire’s outburst on his Virgin website follows Qantas’ backing of a plan suggested by Australian Treasurer Joe Hockey that foreign ownership rules concerning the country’s flag carrier should be relaxed.


Housebuilding in November rose at the strongest pace since 2003, according to Markit, as rising confidence and improving credit conditions helped to boost activity across the sector.

The Guardian


The Resolution Foundation said younger workers faced an almost unprecedented squeeze on both the wages and employment chances four years after the financial crash. The pay of workers in their 20s has tumbled by almost 12 percent since the peak of the recession, according to the thinktank.


Osborne Stationers, a high street chain founded nearly two centuries ago, has gone into administration placing 140 jobs at risk. Directors at the Birmingham-based company took the decision amid the tough retail conditions it has faced since the start of the downturn in 2008.

The Times


The Government is to sell off its 40 percent stake in Eurostar, the operator of high-speed passenger trains between London, Paris and Brussels.


KPMG was blocked from examining Britannia Building Society’s loss-making corporate loan book during due diligence of the lender on behalf of the Co-operative Bank, it emerged on Tuesday.

Sky News


The bidder which lost out to the Co-operative Group in the auction of 632 Lloyds Banking Group branches is being urged to consider legal action to recover the 30 million pounds it spent on its bid.


Sky News has learnt that Better Capital, Mr Moulton’s investment firm, is among a pack of suitors examining offers for the company after it was forced to put itself up for sale.


Fly On The Wall 7:00 AM Market Snapshot



BB&T (BBT) upgraded to Overweight from Equal Weight at Morgan Stanley
Owens Corning (OC) upgraded to Buy from Neutral at SunTrust
Premiere Global (PGI) upgraded to Strong Buy from Outperform at Raymond James
Sonic (SONC) upgraded to Outperform from Market Perform at William Blair
U.S. Bancorp (USB) upgraded to Conviction Buy from Neutral at Goldman


AT&T (T) downgraded to Neutral from Overweight at JPMorgan
Bank of Kentucky (BKYF) downgraded to Neutral from Outperform at RW Baird
ChemoCentryx (CCXI) downgraded to Neutral from Buy at Citigroup
Citigroup (C) downgraded to Neutral from Conviction Buy at Goldman
eBay (EBAY) downgraded to Equal Weight from Overweight at Evercore
Flextronics (FLEX) downgraded to Sell from Neutral at Goldman
Old Line Bancshares (OLBK) downgraded to Neutral from Outperform at RW Baird


Agrium (AGU) initiated with an Outperform at RBC Capital
Allegion (ALLE) initia
ted with a Market Perform at Bernstein
CF Industries (CF) initiated with a Sector Perform at RBC Capital
CommScope (COMM) initiated with a Buy at Deutsche Bank
CommScope (COMM) initiated with a Buy at Goldman
CommScope (COMM) initiated with a Buy at Mizuho
CommScope (COMM) initiated with a Hold at Jefferies
CommScope (COMM) initiated with an Outperform at Credit Suisse
CommScope (COMM) initiated with an Outperform at Raymond James
CommScope (COMM) initiated with an Outperform at Wells Fargo
CommScope (COMM) initiated with an Overweight at Evercore
CommScope (COMM) initiated with an Overweight at JPMorgan
CommVault (CVLT) initiated with a Perform at Oppenheimer
DDR Corp. (DDR) initiated with an Outperform at Imperial Capital
JGWPT Holdings (JGW) initiated with a Buy at Deutsche Bank
JGWPT Holdings (JGW) initiated with a Buy at Jefferies
JGWPT Holdings (JGW) initiated with an Outperform at Keefe Bruyette
JGWPT Holdings (JGW) initiated with an Overweight at Barclays
MacroGenics (MGNX) initiated with an Outperform at Wedbush
Mosaic (MOS) initiated with an Outperform at RBC Capital
Potash (POT) initiated with a Sector Perform at RBC Capital
Splunk (SPLK) initiated with an Outperform at Oppenheimer
Sprague Resources (SRLP) initiated with a Buy at BofA/Merrill
Sprague Resources (SRLP) initiated with an Equal Weight at Barclays


European Commission fined eight banks (DB, SCGLY, JPM, C) EUR 1.71B over interest rates
JPMorgan (JPM) reached EUR 79M settlement with EC related to Libor matter
Deutsche Bank (DB) confirmed EUR 725M settlement with EC
CF Industries (CF) said intends to raise up to $1.5B in long-term debt in early 2014
“Cyber Monday” saw an online spending increase of 18% vs. 2012 (AMZN, EBAY, BBY, WMT), comScore reports
Lennar (LEN) awarded $1B in damages in defamation and extortion case
Kinder Morgan (KMI, KMP, KMR, EPB) raised FY14 dividend 10% to $1.72 per share, sees $6.4B in business segment earnings before DD&A in FY14
Yahoo (YHOO) acquired Ptch, terms not disclosed
Universal Technical Institute (UTI) sees high single digit applications growth in FY14


Companies that beat consensus earnings expectations last night and today include:
Powell (POWL), OmniVision (OVTI), Guidewire Software (GWRE), United Natural Foods (UNFI)

Companies that missed consensus earnings expectations include:
Descartes Systems (DSGX), Bob Evans (BOBE), Golub Capital (GBDC), Universal Technical Institute (UTI)


  • Apparel retail chains including Abercrombie & Fitch (ANF), Chico’s FAS (CHS), Gap (GPS) and Victoria’s Secret came into Q4 with heavy inventory loads. The concern now is the retail industry’s weak showing over Thanksgiving weekend will force them to take bigger markdowns that could hurt their Q4 profits, the Wall Street Journal reports
  • U.S. auto sales (F, GM, TM, NSANY, HMC, DDAIF, VLKAY) in November ran at the strongest pace in more than six years, aided by Black Friday sales promotions, but there were also signs that competitive pressure is ratcheting up on Detroit’s automakers, the Wall Street Journal reports
  • Just a few years ago, Morgan Stanley (MS) lacked the expertise, infrastructure or desire to do a lot of lending, but today it is making a big push into loans to bridge a profit gap with rivals, Reuters reports
  • Toshiba Corp. (TOSBF) will tie up with German real estate company Gagfah SAS to sell energy directly to residents in Germany, sources say, beginning in March, Reuters reports
  • InterContinental Hotels (IHG) plans to open “at least the same” number of hotels in China next year–17–as 2013, even as growth in room revenue slows, Bloomberg reports


Access Midstream (ACMP) files to sell 6M units representing limited partners
American DG Energy (ADGE) files to sell 633K shares for holders
Celldex (CLDX) files to sell 6.5M shares of common stock
Clovis (CLVS) 2M share Secondary priced at $57.50
Del Frisco’s (DFRG) files to sell 5.39M shares for holders
EVERTEC (EVTC) files to sell 15.29M shares for holders
Norwegian Cruise Line (NCLH) 22M share Secondary priced at $33.25
Oasis Petroleum (OAS) files to sell 7M shares of common stock


via Zero Hedge Tyler Durden

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