Frontrunning: December 2

America’s Role as Consumer of Last Resort Goes Missing (BBG)
Holiday sales sag despite blitz of deals (WSJ)
Abe Support Falls Below 50% for First Time Amid Secrecy Drive (BBG)
U.S. airlines give China flight plans for defense zone (Reuters), while Japan: no change to airlines’ notification policy when flying in East China Sea zone (Reuters)
Thai protesters seek to topple PM after clashes (Reuters)
Hilton Seeks as Much as $2.4 Billion in Biggest Hotel IPO (BBG)
Biden on delicate mission to defuse tensions in East Asia (Reuters)
Fed eyes financial system weak link (WSJ)
Pentagon in line of fire in US budget war (FT)
China’s monetary squeeze collides with housing bubble (FT)
China to End IPO Freeze With 50 New Share Sales Ready by January (BBG)
Global factory growth picks up but Europe diverging (Reuters)
Japan to take up spat over China air zone with US (FT)
Wal-Mart Steps Up Security as Fights Break Out Over TVs (BBG)

Overnight Media Digest

WSJ

* Insurers and some states are continuing to look for ways to bypass the balky technology underpinning the healthcare law despite the Obama administration’s claim Sunday that it had made “dramatic progress” in fixing the federal insurance website.

* Retail spending over Thanksgiving weekend dropped for the first time in at least seven years, as the blitz of deals and earlier opening hours apparently failed to pry more dollars out of the hands of budget-conscious shoppers.

* Regulators have spent the past five years trying to siphon risk out of the financial system, but the Federal Reserve sees one major piece of unfinished business: short-term funding.

* US Airways CEO Doug Parker said overcoming the government’s objections was only part of the challenge to the AMR merger. He also had to persuade executives at both companies that the deal would go through.

* Stocks in China fell Monday after the country signaled an imminent end to its moratorium on initial public offerings, while shares in Tokyo continued to ease off last week’s near six-year high.

* A four-year-old Justice Department probe into allegations that large banks and others conspired to thwart competition in the $24.3 trillion market for credit-default swaps is winding down and penalties aren’t planned.

* With corporate debt issuance racing toward a record, some large companies are rolling out unusual offerings in a bid to serve the bond market’s every nook and cranny.

* GrainCorp Ltd suffered its second blow in almost as many days when its chief executive quit in the wake of Australia’s rejection of a 3 billion Australian dollar ($2.7 billion) takeover bid by U.S. agribusiness Archer Daniels Midland Co.

* The FTC is taking a closer look at whether media outlets are adequately identifying websites’ “sponsored content,” which can sometimes blur the lines between articles and promotional pitches.

Britain’s industrial conglomerates told the Financial Times that green taxes imposed by the David Cameron government were putting the companies’ UK plants at a competitive disadvantage compared to their European rivals’.

The economic recovery in Britain is drawing investors from all over the world, taking the eurozone by surprise. Economists are attributing this sudden strength in the UK to a revival in confidence and some predict that Britain would be the world’s fastest growing developed economy in the next five years.

Britain’s 19 water and sewage service operators are scheduled to submit their plan on Monday to hold rate hikes below the inflation rate until the end of the decade.

Fondo Strategico Italiano is the likely front-runner for a minority stake in Italian luxury brand Versace, estimated to be worth 850 million pounds, sources familiar with the matter told the Financial Times.

BP, in a court filing last week, revealed the oil major will begin receiving payments again on account of economic losses from the 2010 Deepwater Horizon oil spill.

Software firm Servelec will launch its initial public offering of 68.3 million shares with an expected valuation of 122 million pounds, making it the largest technology float in three years.

NYT

* The HealthCare.gov site appears easier to use for most people, but problems in the so-called backend systems that deliver consumer information to insurers still have not been fixed.

* In an era of chastened Wall Street egos, Michael Corbat, the chief of Citigroup, has cultivated a workmanlike demeanor out of the spotlight. The low-key approach taken by Citigroup – which faces a number of investigations of its own – has not gone unnoticed inside JPMorgan. Some board members and executives there have recently pointed to Corbat in privately discussing the apparent advantages of a more self-effacing approach in a chief executive.

* Some features of physical books may be getting a second life online, but efforts to completely re-imagine the core experience of the book has yet to catch on. Even as the universe of printed matter continues to shrivel, the book – or at least some of its best-known features – is showing remarkable staying power online.

* Paul Crouch, a television evangelist who founded the Trinity Broadcasting Network with his wife and turned it into the world’s largest Christian television network, died on Saturday. He was 79.

* Over the course of the weekend, consumers spent about $1.7 billion less on holiday shopping than they did the year before, according to the National Retail Federation.

Canada

THE GLOBE AND MAIL

* Ottawa has recovered more e-mail traffic that stands to shine a greater light on the role of the Prime Minister’s Office and its top legal adviser in negotiations over the living expenses of Senator Mike Duffy. (http://link.reuters.com/dyb25v)

* Police are charging a 53-year-old engineer with attempting to pass along classified Canadian shipbuilding techniques to China, a set of al
legations that speaks to how private contractors can be possible backdoor threats to government secrets. (http://link.reuters.com/fyb25v)

Reports in the business section:

* The latest craze to hit Canada’s banks is a new take on an old payment system – personal checks. Despite the surge in electronic money transfers and the rapid growth of credit-card transactions, many Canadians still use checks. The Canadian Payments Association recently estimated that almost four million are written each business day. (http://link.reuters.com/gyb25v)

* Jobs data have painted a mixed picture of the labor market this fall, with hiring in some sectors (education and utilities) offsetting weakness in others (construction and manufacturing). As a result, net employment hasn’t changed much in recent months. Wage growth, though muted, continues to outpace inflation. (http://link.reuters.com/hyb25v)

NATIONAL POST

* A speedy undercover investigation that lasted less than 48 hours led to the arrest this weekend of a Toronto naval engineer accused of trying to pass secrets about Canadian patrol ships to the government of China. Qing Quentin Huang, 53, was charged Sunday with two counts under the Security of Information Act for allegedly attempting to “communicate to a foreign entity” details of Canada’s National Shipbuilding Procurement Strategy.

China

CHINA DAILY

– China’s recent declaration of an air defence zone in the East China Sea will be hard to navigate during a visit to some Asian countries, including China, by U.S. Vice President Joe Biden this week, an editorial by the official newspaper said.

PEOPLE’S DAILY

– The launch of China’s first ever extra-terrestrial landing craft into orbit en route to the moon in the small hours of Monday is a major step to fulfil the dream of national revival, an editorial said.

– China has published a book on President Xi Jinping’s comments on how to unite the whole country to fulfil the dream of national revival.

CHINA SECURITIES JOURNAL

– A commentary says the dual steps to resume initial public offerings (IPOs) and let listed firms issue preferred shares will inject long-term vitality into China’s stock market.

– Securities analysts say Chinese share prices are likely to continue their recent “slow bull run” despite the regulatory announcement to resume IPOs in January.

SECURITIES TIMES

– China now has 763 companies now in the waiting list to launch IPOs.

– The Shenzhen Stock Exchange uses a T+0 system to let investors sell some products, including gold ETFs (exchange-traded funds), they buy on the same day. Shanghai did that earlier.

SHANGHAI SECURITIES NEWS

– The Shanghai and Shenzhen stock exchanges say they will make preparations for the resumption of IPOs.

– The China Securities Regulatory Commission said it will promote options derived from agricultural products.

CHINA BUSINESS NEWS

– The combined turnover of China’s three commodity futures exchanges jumped 62 percent year on year in the first 11 months of this year, exceeding the total of last year, as a slew of new futures contracts have been launched this year.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

American Eagle (AEO) upgraded to Buy from Neutral at Janney Capital
eBay (EBAY) upgraded to Buy from Neutral at SunTrust
Knight Transportation (KNX) upgraded to Overweight from Neutral at JPMorgan
Marathon Petroleum (MPC) upgraded to Buy from Hold at Deutsche Bank
Monster Beverage (MNST) upgraded to Overweight from Neutral at JPMorgan
Oceaneering (OII) upgraded to Buy from Hold at Jefferies
Pacific Coast Oil (ROYT) upgraded to Overweight from Neutral at JPMorgan
Progressive (PGR) upgraded to Neutral from Sell at Goldman
Rackspace (RAX) upgraded to Outperform from Market Perform at Raymond James
Ruckus Wireless (RKUS) upgraded to Buy from Neutral at Goldman
Swisscom (SCMWY) upgraded to Buy from Neutral at Nomura
WebMD (WBMD) upgraded to Neutral from Sell at Goldman
Westar Energy (WR) upgraded to Buy from Neutral at Goldman

Downgrades

3M Company (MMM) downgraded to Underweight from Equal Weight at Morgan Stanley
AGL Resources (GAS) downgraded to Sell from Neutral at Goldman
Everest Re (RE) downgraded to Hold from Buy at Deutsche Bank
Everest Re (RE) downgraded to Sell from Neutral at Goldman
Fairchild (FCS) downgraded to Market Perform from Strong Buy at Raymond James
Genesco (GCO) downgraded to Neutral from Overweight at Piper Jaffray
Groupon (GRPN) downgraded to Neutral from Buy at Goldman
Hologic (HOLX) downgraded to Market Perform from Outperform at Cowen
OpenTable (OPEN) downgraded to Neutral from Buy at Goldman
Petrobras (PBR) downgraded to Underperform from Outperform at Credit Suisse
Shire (SHPG) downgraded to Neutral from Buy at UBS
Sprint (S) downgraded to Neutral from Outperform at Macquarie
Travelers (TRV) downgraded to Neutral from Buy at Goldman
Trulia (TRLA) downgraded to Neutral from Buy at Goldman
W. R. Berkley (WRB) downgraded to Sell from Neutral at Goldman

Initiations

Arc Logistics (ARCX) initiated with an Overweight at Barclays
Barracuda Networks (CUDA) initiated with an Overweight at JPMorgan
Blue Capital (BCRH) initiated with an Equal Weight at Barclays
CST Brands (CST) initiated with a Buy at Mizuho
EXCO Resources (XCO) reinstated with a Sell at Goldman
Endocyte (ECYT) initiated with an Overweight at Piper Jaffray
Federated National (FNHC) initiated with an Outperform at Raymond James
Gaming and Leisure Properties (GLPI) initiated with an Outperform at Wells Fargo
LGI Homes (LGIH) initiated with a Buy at Deutsche Bank
Mavenir Systems (MVNR) initiated with a Buy at BofA/Merrill
Mavenir Systems (MVNR) initiated with a Buy at Needham
Mavenir Systems (MVNR) initiated with an Overweight at Morgan Stanley
Millennial Media (MM) initiated with an Overweight at Evercore
Norcraft (NCFT) initiated with a Buy at Citigroup
Norcraft (NCFT) initiated with a Buy at UBS
Norcraft (NCFT) initiated with a Hold at Deutsche Bank
Norcraft (NCFT) initiated with an Outperform at RBC Capital
Rocket Fuel (FUEL) initiated with an Underweight at Evercore
Sophiris Bio (SPHS) initiated with a Neutral at Citigroup
Tableau Software (DATA) initiated with a Sector Perform at RBC Capital
Tetra Technologies (TTI) initiated with a Market Perform at Cowen
Twitter (TWTR) initiated with a Buy at Deutsche Bank
Twitter (TWTR) initiated with a Buy at Goldman
Twitter (TWTR) initiated with a Neutral at JPMorgan
Twitter (TWTR) initiated with an Equal Weight at Morgan Stanley
Twitter (TWTR) initiated with an Underperform at BofA/Merrill
VMware (VMW) initiated with an Overweight at Atlantic Equities
Wix.com (WIX) initiated with an Outperform at RBC Capital
Wix.com (WIX) initiated with an Overweight at JPMorgan

HOT STOCKS

GrainCorp (GRCLF) CEO resigned after ADM (ADM) deal fell through
Canada Competition Bureau approved TELUS (TU) purchase of Public Mobile
Akamai (AKAM) to acquire Prolexic for about $370M
Rockwood (ROC) to acquires 49% interest in Talison Lithium
Telecom Italia (TI) said not planning to sell Tim Brasil stake
ResMed (RMD) acquired Prague-based Unimedis, terms not disclosed

NEWSPAPERS/WEBSITES

Retail spending over Thanksgiving weekend dropped for the first time in at least seven years (WMT
, DIS, GME, BBY JCP), the National Retail Federation said, as the blitz of deals and earlier opening hours apparently failed to pry more dollars out of the hands of budget-conscious shoppers, the Wall Street Journal reports
A four year old Justice Department civil probe into allegations that large banks and others (C, GS, JPM, MS, BCS) conspired to thwart competition in the $24.3T market for credit-default swaps is winding down and penalties aren’t planned, sources say, the Wall Street Journal reports
Comcast (CMCSA) is testing new advertising technology that inserts up-to-date commercials into past episodes of TV shows that are available on demand, a development that could help television networks generate additional revenue, Reuters reports
Panasonic (PCRFY) is in talks with automotive parts makers for possible acquisitions or alliances as Japan’s No. 2 TV producer seeks to expand the components it delivers to vehicle manufacturers, Bloomberg reports
The weakest employment recovery in seven decades is proving a boon to equity markets. Five years into a rally that has restored $14T to share prices, U.S. payrolls remain 1.5M below the level in 2008. Resistance to hiring will help push S&P’s 500 Index profit margins above 10% next year, the highest ever, data show, Bloomberg reports

BARRON’S

Capital One (COF) could rise over 17% in a year
GM (GM), Delta (DAL), Safeway (SWY, others (PBI, HPQ, OI) could turn around
Investors should continue to stay clear of SolarCity (SCTY)
Investors may want to take a closer look at American Realty (ARCP)
HP’s (HPQ) shares could continue to rise as multiple expands

SYNDICATE

Cheniere Energy Partners LP (CQH) commences 30M share IPO
PEDEVCO(PED) announces proposed public offering of common stock