Frontrunning: June 30

Facebook Researchers Manipulated News Feeds in 2012 Study (BBG)
Argentina at Brink of Default as $539 Million Payment Due (BBG)
Hedge fund correlation risk alarms investors (FT)
As China Flexes Muscle, Obama Frets Over Rival’s Weakness (BBG)
As caliphate declared, Iraqi troops battle for Tikrit (Reuters)
Dubai Caps Worst Month Since 2008 as Real Estate Stocks Tumble (BBG)
Russian Advisers Ready Iraq to Use New Combat Aircraft (BBG)
Blackstone Readies Big-Bet Hedge Fund (WSJ) – so what was GSO?
Pope says communists are closet Christians (Reuters)
Thomson Reuters revising FX trading standards (Reuters)
Scotland Holds Billions of Barrels of Shale Oil, Report Says (BBG)
U.S. Investment Firms Challenge Puerto Rico Restructuring Law (WSJ)
BNP Paribas Dollar-Clearing Ban Said to Start in 2015 (BBG)
BlackRock ETFs near $1 trillion as it loses market share to Vanguard (Reuters)
U.S. government to unveil near $9 billion fine for France’s BNP (Reuters)
Soros Caught in ClickSoftware Rout That Puzzles Analysts (BBG)

Overnight Media Digest

WSJ

* The extremist group known as the Islamic State of Iraq and al-Sham (ISIS) is expanding its foothold in Syria after recent gains in neighboring Iraq, intensifying its clashes here against other Islamist rebel factions. (http://on.wsj.com/1sQ8xXl)

* Funds managed by Franklin Templeton Investments and OppenheimerFunds Inc asked the U.S. District Court for the District of Puerto Rico to block a new law that allows some public agencies to restructure their debt, arguing that only Congress is allowed to create bankruptcy rules. (http://on.wsj.com/1jB9WYr)

* After a series of high-profile data breaches and warnings, corporate boards are waking to cyberthreats, grappling with security issues they once relegated to technology experts. So far this year, 1,517 companies traded on the New York Stock Exchange or Nasdaq Stock Market listed some version of the words cybersecurity, hacking, hackers, cyberattacks or data breach as a business risk in securities filings, according to a Wall Street Journal analysis. (http://on.wsj.com/1m1kfJe)

* Blackstone is quietly laying plans to start a hedge fund that will make big, bold bets, an effort it hopes will eventually rival some of the largest firms in the business. (http://on.wsj.com/V0fExi)

* The landmark settlement expected Monday between U.S. authorities and BNP Paribas SA began to take shape last summer, after bank executives flew to New York to share an embarrassing admission: The French bank had been processing potentially illicit dollar transactions with countries blacklisted by Washington years after the U.S. began investigating the lender. (http://on.wsj.com/TIB9BB)

* As soon as the U.S. Supreme Court rendered its long-awaited decision on securities class-action litigation last week, a fight brewed over who won the case. (http://on.wsj.com/1nWPeVo)

* A social-network furor has erupted over news that Facebook Inc in 2012, conducted a massive psychological experiment on nearly 700,000 unwitting users. To determine whether it could alter the emotional state of its users and prompt them to post either more positive or negative content, the site’s data scientists enabled an algorithm, for one week, to automatically omit content that contained words associated with either positive or negative emotions from the central news feeds of 689,003 users. (http://on.wsj.com/1nVk7IC)

Jean-Claude Juncker, the president-designate of the European Commision, told David Cameron that he was “fully committed” to finding solutions to UK’s political concerns, despite the British prime minister’s bid to block his nomination for EU’s top job.

BNP Paribas SA has negotiated a partial concession with U.S. authorities on its $8.9 billion settlement, relating to alleged sanction violations by the French bank.

The partners in Israel’s giant natural gas field have signed a preliminary agreement on a deal worth $30 billion to supply British oil and gas company BG Group with gas via a new undersea pipeline.

Senior executives at GlaxoSmithKline, which is facing allegations of bribery in China, on Sunday received a secretly-filmed sex tape of the drugmaker’s top manager in the country.

The value of mergers and acquisitions touched its highest level since 2007, rising 75 percent to hit $1.75 trillion in the first six months of the year.

The Bank for International Settlements warned that ‘euphoric’ financial markets were out of step with reality, and urged governments to scrap policies that could lead to asset bubbles.

Brokers have warned that rising competition between global reinsurers is forcing these companies to provide cover for terrorism, forcing them to revisit terms they have sought to avoid since the 9/11 attacks.

NYT

* Facebook revealed that for one week in January 2012, it had manipulated the news feeds of over half a million randomly selected users to change the number of positive and negative posts they saw. It was part of a psychological study to examine how emotions can be spread on social media. (http://nyti.ms/1q7fO1p)

* Kenneth Feinberg, a prominent compensation expert hired by General Motors, is scheduled to announce a plan on Monday to distribute money to victims of accidents caused by the automaker’s defective ignition switch. (http://nyti.ms/1m1j7VZ)

* An organization representing the world’s main central banks warned on Sunday that dangerous new asset bubbles were forming even before the global economy has finished recovering from the last round of financial excess.(http://nyti.ms/1qpCSde)

* Verizon Communications is preparing to move its corporate offices from downtown back into far smaller quarters inside the former New York Telephone building at 1095 Avenue of the Americas, at 42nd Street. Its diminished presence parallels the steady erosion of demand for its original business: providing plain old telephone service over landlines. The number of landlines Verizon has left in New York State is down to about 3 million from 12 million. (http://nyti.ms/1r3wtEO)

* The day after the Supreme Court ruled against Aereo in a copyright case brought by the nation’s major broadcasters, Mark Ely, chief executive of streaming television service Simple.TV, was trying to scoop up Aereo customers by promoting his start-up on social media. (http://nyti.ms/1mxLmaJ)

Canada

THE GLOBE AND MAIL

* Brian Storseth, Conservative party MP from Alberta, is speaking out against Employment Minister Jason Kenney’s changes to the temporary foreign worker program, calling for an exception to be made for the province. (http://bit.ly/1iMhA7x)

* A group of prominent General Motors of Canada Ltd dealers is suing the company and its parent General Motors Co, saying the auto maker has ignored their repeated pleas for financial help to address a dramatic drop in sales and market share. (http://bit.ly/1qqnyNH)

Reports in the business section:

* BCE Inc, Rogers Communications Inc, Shaw Communications Inc and the Canadian Broadcasting Corp, Canada’s biggest broadcast companies are at odds with each other over consumer choice and support for local programming, setting the stage for a debate at September hearings that could reshape the way Canadians watch and pay for television. (http://bit.ly/1lIwf2I)

NATIONAL POST

* Four federal by-elections in Toronto and Alberta on Monday will provide a test of just how far back from the wilderness the Liberals have come under the leadership of Justin Trudeau. The most crucial test will likely be in Trinity-Spadina, where the Liberals are going all-out to steal a seat held by the New Democratic Party since 2006 by Olivia Chow, the widow of beloved former party leader Jack Layton. (http://bit.ly/1z1F1hU)

* Canadian doctors are looking at offering a fascinating new procedure for saving the fertility of pre-pubescent cancer patients, where pieces of ovary or testicle are frozen before toxic treatments, then transplanted back years or decades later. Scientific and ethical questions still hang over the concept, and a little-known Canadian law could actually prevent lab research on it. (http://bit.ly/1mMtXQl)

FINANCIAL POST

* Spanish billionaire behind the Zara retail banner, Amancio Ortega Gaona, is buying into Toronto’s upscale Yorkville commercial district, paying $255 million for 150 Bloor St. W., a 270,000-square-foot mixed retailing and office building, sources tell the Financial Post. (http://bit.ly/1qqoKRc)

China

– China urgently needs to launch a deposit insurance system to help its interest rate reforms, says a report.

– The current corrective period in China’s housing market is not likely to end soon, says a commentary.

CHINA BUSINESS NEWS

– Reports that the United States has reached agreements with 86 countries to investigate tax payments of U.S. citizens outside the country will help China’s anti-corruption campaign.

– The Chinese government has started deploying eight inspection teams across the country to investigate how regional governments are implementing central policies and will hold accountable those found wanting.

SHANGHAI SECURITIES NEWS

– Many Chinese mutual funds believe that China’s stock market is likely to walk out of years of weakness in the second half of this year, partly driven by official efforts to reform the country’s capital markets.

CHINA DAILY

– China, the largest contributor of personnel to U.N. peacekeeping, will provide more expertise and training to fight against crime on top of its traditional role of maintaining order and security.

PEOPLE’S DAILY

– Hong Kong must abide by Chinese laws related to the Hong Kong Special Administrative Region, the newspaper said in a commentary after Hong Kong lawyers protested against what they see as Chinese interference on Friday.

Britain

The Telegraph

ABBVIE ON SHIRE COURTSHIP TRIP TO LONDON

The boss of US drug-maker AbbVie Inc is flying into London this week to court Shire’s shareholders and try to convince them of the merits of a potential takeover.

INDEPENDENT SCOTLAND RISKS BEING DESTABILISED BY BANKS

An independent Scotland would be even more exposed to its banking sector than Iceland was at the height of the financial crisis if the country’s biggest institutions remained there.

ADDISON LEE OWNER FLAGS SALE

The American backer of Addison Lee, the London minicab firm, is to explore a possible sale of the firm just over a year after taking control.

The Guardian

LABOUR OFFERS OLIVE BRANCH TO BUSINESS BY TARGETING TAX AND INVESTMENT

Ed Balls is to launch a bid to bolster Labour’s credibility with business by promising to keep a low rate of corporation tax and attract long-term investors to Britain, as he brushed off criticism from the policy chief Jon Cruddas that a “profound dead hand” within the party is blocking bold reforms.

HOPES RAISED THAT TAKEOVER WILL SAVE MILFORD HAVEN OIL REFINERY JOBS

Hundreds of workers at the Milford Haven oil refinery in south-west Wales are awaiting confirmation that their jobs have been saved after weekend reports that a deal to sell the plant was close.

The Times

OSBORNE’S GRAND PLAN TO JOIN UP INCOME TAX AND NATIONAL INSURANCE

Income tax and national insurance will be merged under plans being lined up as a key element of the next Conservative manifesto.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Chicago PMI business barometer for June at 9:45–consensus 64.0
Pending home sales for May at 10:00–consensus up 1.0% for the month

ANALYST RESEARCH

Upgrades

Amedisys (AMED) upgraded to Hold from Sell at Deutsche Bank
Canadian National (CNI) upgraded to Overweight from Equal Weight at Barclays
Charter (CHTR) upgraded to Overweight from Equal Weight at Evercore
CoStar Group (CSGP) upgraded to Outperform from Market Perform at JMP Securities
DreamWorks Animation (DWA) upgraded to Neutral from Underweight at Piper Jaffray
KLA-Tencor (KLAC) upgraded to Buy from Neutral at B. Riley
Norfolk Southern (NSC) upgraded to Overweight from Equal Weight at Barclays
Ryanair (RYAAY) upgraded to Neutral from Underperform at BofA/Merrill
TransCanada (TRP) upgraded to Buy from Neutral at Citigroup
Yahoo (YHOO) upgraded to Overweight from Neutral at Piper Jaffray

Downgrades

Fresenius Medical (FMS) downgraded to Underperform from Hold at Jefferies
Rayonier (RYN) downgraded to Sector Perform from Outperform at RBC Capital
Syngenta (SYT) downgraded to Underweight from Neutral at JPMorgan
Unitil (UTL) downgraded to Hold from Buy at Brean Capital

Initiations

Altisource Residential (RESI) initiated with a Neutral at Citigroup
DaVita (DVA) initiated with a Buy at Jefferies
Kona Grill (KONA) initiated with a Buy at KeyBanc
Marrone Bio (MBII) initiated with an Outperform at RW Baird
Williams Partners (WPZ) initiated with a Buy at UBS

COMPANY NEWS

American Apparel (APP) adopts stockholder rights plan
BlackRock (BLK) Advisors receives Wells Notice
Carlyle Group (CG) to conduct tender offer for SBI Mortgage Co
Gabelli files to nominate three to board of Superior Industries (SUP)
Illumina (ILMN) announces agreements with Genoma, two others
InterOil (IOC) sells downstream businesses for $525.6M
Kindred Healthcare (KND) sends letter to Gentiva Health (GTIV) board
MannKind (MNKD) confirms FDA approval of Afrezza
PetroQuest (PQ) enters JV with Midstates Petroleum in Louisiana
Philips (PHG) to combine LED components, Automotive lighting businesses
Raytheon (RTN) awarded $275.4M government contract modification
Ryanair (RYAAY) Deputy CEO and CFO Howard Millar to step down

NEWSPAPERS/WEBSITES

Adobe (ADBE) shares could climb 20%, Barron’s says
Anglo American (AAUKY) looks to sell up to $4B in mining assets, Sunday Times says
Blackstone (BX) prepares to start ‘big-bet’ hedge fund, WSJ says
Boeing (BA), Airbus submit offers for $1.38B South Korean order, Reuters says
Chevron (CVX) has 30% upside potential, Barron’s reports
Chico’s FAS (CHS) looks tempting for LBO, Barron’s says
Concerns about Valero (VLO) look overblown, Barron’s says
Facebook (FB) experiment on users creates backlash, WSJ says
General Motors (GM) could still face criminal charges, NY Times says
Microsoft (MSFT) may be planning to halt Surface Min production, DigiTimes reports
Murphy Oil (MUR) in talks to sell UK refinery Milford Haven, Reuters says
NXP Semiconductors (NXPI) technology rumored to be in iPhone 6, WSJ says
NetApp (NTAP) could gain 25%, Barron’s says
ResMed (RMD) shares could fall at least 15%, Barron’s says

SYNDICATE

Malibu Boats (MBUU) files to sell 4M shares of Class A common stock
Speed Commerce (SPDC) files to sell 4.4M shares of common stock for holders