Frontrunning: May 23

  • The Fed can’t print trade? World Trade Flows Fall in First Quarter (WSJ)
  • PBOC’s Zhou Says China May Have Housing Bubble in ‘Some Cities’ (BBG)
  • ECB’s Weidmann – Reviving ABS market not task for central bank (Reuters)
  • LOL: Fitch upgrades Greece by a notch to ‘B’; outlook stable (Reuters)
  • LOL x2: Spain Sovereign Debt Rating Upgraded by S&P (BBG)
  • China Will Vet Tech Firms After Threatening U.S. Retaliation (BBG)
  • US to claim victory over China in WTO car dispute (BBG)
  • Obama urges Democrats to vote in midterms, attacks Republicans (Reuters)
  • U.S. Military Pushes for More Disclosure on Drone Strikes (WSJ)
  • The power struggle behind China’s corruption crackdown (Reuters)
  • Secrecy of Oil-by-Train Shipments Causes Concern Across the U.S. (WSJ)

Overnight Media Digest


* Hewlett-Packard Co is cutting thousands more jobs, as efforts to revitalize the company have sputtered amid a rapidly changing technology landscape. The company said Thursday it would cut an additional 11,000 to 16,000 jobs on top of 34,000 positions it previously said would be eliminated as part of a multi-year restructuring plan. (

* Investors defied a technology-market slump to send shares of Chinese online retailer Inc as much as 20 percent higher after its initial public offering Thursday in New York. The shares opened trading at $21.75, and rose as high as $22.80 in early trading. The shares closed their first day at $20.90, a gain of 10 percent.(

* Cox Communications Inc became the biggest U.S. cable operator to commit to rolling out a gigabit-speed broadband offering to all its residential customers, starting this year, the latest sign that the push for ultra-fast broadband speeds sparked by Google is gaining traction throughout the industry. (

* Google Inc is developing a new, cutting-edge tablet as it continues to experiment with advanced vision capabilities for mobile devices. The company plans to produce about 4,000 of the prototype tablets beginning next month, according to people briefed on the company’s plans. (

* One of AstraZeneca Plc’s biggest shareholders, BlackRock Inc, has urged the British pharma giant’s board to eventually re-engage in talks with Pfizer Inc over a possible deal, but backed its rejection of Pfizer’s offer this week, according to people familiar with the situation. (



AstraZeneca’s biggest shareholders have told the drugmaker they want the company to take a fresh look at a possible deal with Pfizer by August.

Swiss drugmaker Roche Holding AG said it had been visited by a unit of China’s anti-trust regulator, in the latest move in the widening crackdown on corruption in the country’s pharmaceutical sector.

Germany’s largest bank Deutsche Bank’s top executives faced angry investors at the annual shareholders’ meeting, less than a week after announcing a surprise 8 billion euro capital raising plan.

Spanish government chose to move the country’s maiden inflation-linked bonds in line with Eurozone Harmonised Index of Consumer Prices across European countries.

Wizz Air, central eastern Europe’s largest airline, plans to list its shares on the London Stock Exchange next month and is seeking to raise 200 million euros ($273 million).



* The St. Petersburg International Economic Forum aims to woo foreign investment, but the event is under a cloud this year as Russia stands on the verge of recession. A panel at an annual economic forum here was deeply divided over the direction of the Russian economy. The isolationists in the group favored relying on state banks for its financing needs. Others called for Russia to deepen its ties with China, while a different contingent said global trade and commerce remain critical. (

* Hundreds of miles from Credit Suisse’s Madison Avenue office tower and an ocean away from its headquarters in Zurich, the bank found an unlikely opponent in Alexandria, Virginia. Federal prosecutors there helped lead an investigation into Credit Suisse, which this week pleaded guilty to helping thousands of American clients hide their wealth overseas. (

* The Mizkan Group’s $2.15 billion purchase of Unilever Plc’s Ragu and Bertolli pasta sauce brands is the latest overseas foray by a storied and gutsy vinegar maker, one that helped transform sushi from an obscure delicacy into a global culinary phenomenon. (

* The slide continued on Thursday for the deeply troubled Sears Holdings Corp, whose dismal earnings report not only lacked signs of improvement but also laid bare how few options the company had left. Sears Holdings, owner of Sears and Kmart stores, was once again the bleakest of the lackluster reports. It announced that it would close at least 80 stores this year, a downsizing move it has made in previous years without significant results. (

* Online Chinese retailer Inc started life as a publicly traded company with a rousing start, closing up 10 percent on the Nasdaq on Thursday. At that price, shareholders valued the company at more than $28.6 billion, more than other American technology names like Twitter Inc and LinkedIn Corp. Investors in the United States seemed eager for the offering, even though some analysts have criticized’s corporate governance and lack of profitability in recent years. (




* The United States has implemented limits on emissions from the oil and gas sector that are “significant” and “comparable” to those the Canadian government is considering, says a newly released Environment Canada memo, one that contradicts Prime Minister Stephen Harper’s assertion that Canada is waiting for the U.S. regulations before it acts. (

* The Conservative Party of Canada has postponed a bitter nomination battle in a Toronto-area riding, saying it needs time to sort out complaints of fraud and robocalls in the riding. (

Reports in the business section:

* Russia is weighing whether it should end its $3.4 billion deal with Bombardier Inc to buy Q400 turboprop planes to be built in a new assembly plant in Russia, the country’s industry minister said. (


* Europe’s seal ban is arbitrary, unfair and “inconsistent,” the World Trade Organization ruled Thursday, but the continent will still be allowed to keep out Canadian seal products in order to “protect public morals.” The ruling by the WTO Appellate Body was cheered by animal activists, but roundly condemned in Canada’s seal hunting regions. (

* A man accused of killing five young people in Calgary’s worst mass murder has been found fit to stand trial. Matthew de Grood is charged with first-degree murder after four men and a woman were stabbed to death at a house party that was being held last month to mark the end of the university school year. (


* The Keystone XL pipeline debacle with the United States has drawn plenty of second guessing of late that it’s all Canada’s fault – government’s pushing too hard on behalf of the oil industry for approval in the United States and doing too little to ingratiate themselves to President Barack Obama by getting tough on greenhouse emissions from the sector. The man on the front lines of campaign, Canadian ambassador to the United States Gary Doer, couldn’t disagree more. (

* Toyota Motor Corp is recalling 430,500 vehicles for three separate safety problems, including 82,381 Sienna minivans in Canada that face potential problems caused by salt used by road crews to melt snow or ice in some areas. (


Hong Kong


— An Italian journalist who mounted an undercover operation to expose a suspected eastern European gangster told the District Court how easy it was to set up a money-laundering operation in Hong Kong. (

— A more complete picture of Hong Kong, including all the off-street nooks and crannies, will soon be available online in 3D, via mapping developed by the University of Science and Technology. The comprehensive map of the city is being touted as better than those from Google and Apple. (

— Shanghai vice-mayor Tu Guangshao has heralded further financial liberalisation in the city’s free-trade zone, fuelling speculation about future full convertibility of the yuan in the test bed for mainland economic reform. (


— Cheung Kong Holdings has priced its first batch of 350 units at City Point in Tsuen Wan close to those of secondary homes nearby, prompting some owners to cut their asking prices. The joint project has a price tag of up to HK$12,071 ($1,600) per sellable sq ft after a discount of up to 15.75 percent. (

— The “Father of Lan Kwai Fong,” Allan Zeman, says he supports the idea of Hong Kong expanding into Hengqin in Zhuhai or Nansha as Hong Kong needs to compete with mainland cities. (

— Staff training budgets grew to 3.1 percent of annual salaries last year, the highest since 2009, as companies want to develop and retain staff, a survey by personnel experts showed. This is the second-biggest proportion since 2004, the study by the Hong Kong Institute of Human Resource Management found. (


— Sunac China Holdings Ltd said it would buy 24.3 percent of Greentown China Holdings Ltd for about HK$6.3 billion ($812.52 million), a price equivalent to HK$12 per Greentown share or 56 percent premium to the previous close.

— Property-to-transportation group Shun Tak Holdings Ltd said it would sell its funeral service business in Macau for HK$624 million ($80.48 million).


— Li & Fung Ltd’s planned spinoff firm Global Brands Group is set to be a high growth company and is planning to acquire more brands which have potential to expand globally, according to Chief Executive Officer Bruce Rockowitz.



The Telegraph



Britain’s huge debt interest bill remains on course to hit £1bn a week this year, after official data showed the government borrowed 3 billion pounds more in April than forecast by analysts.



Jan Heere, who was hired from Inditex, the owner of Zara, in 2011, is understood to be returning to a role in Russia, although he is yet to resign from his role at Marks and Spencer .

The Guardian



The first plastic banknotes in Great Britain will be introduced in Scotland next year to mark the 125th anniversary of the Forth Bridge, Clydesdale Bank has announced.



Royal Mail has warned that postal deliveries to rural areas are under threat because rivals are being allowed to cherry pick easy and profitable deliveries in towns and cities without having to run services to isolated homes such as on Scottish islands.

The Times



Coca-Cola is to launch a fresh assault on Britain’s 1.4 billion pound bottled water market by bringing its glacéau smartwater across the Atlantic.



A “political fix” is emerging in favour of building a second runway at Gatwick airport as the government realises that it would be unable to expand Heathrow, mayor of London Boris Johnson claimed yesterday.

Sky News



AstraZeneca’s biggest shareholder wants the pharmaceuticals group to consider renewing talks with Pfizer about a 69 billion pound takeover offer once a curfew period imposed by City regulators has expired.



The maker of a new type of music keyboard has raised 7.6 million pound in funding, in a series A round that could value the company at 40 million pound. Dalston-based tech start up Roli raised the money from Balderton, Firstmark, Index and Universal Music.



Fly On The Wall 7:00AM Market Snapshot


Domestic economic reports scheduled today include:
New home sales for April at 10:00–consensus up 10.7% to 420K rate



FireEye (FEYE) upgraded to Overweight from Equalweight at Barclays
German American Bancorp (GABC) upgraded to Outperform at Keefe Bruyette
L Brands (LB) upgraded upgraded to Buy from Hold at Stifel
Portfolio Recovery (PRAA) upgraded to Buy from Neutral at Janney Capital
RTI International (RTI) upgraded to Overweight from Neutral at JPMorgan
Rubicon (RBCN) upgraded to Perform from Underperform at Oppenheimer
Saint Joe Co. (JOE) upgraded to Outperform from Market Perform at Raymond James


Aeropostale (ARO) downgraded to Sector Perform from Outperform at RBC Capital
Aflac (AFL) downgraded to Equalweight from Overweight at Barclays
Covisint (COVS) downgraded to Sector Perform from Outperform at Pacific Crest
Hain Celestial (HAIN) downgraded to Hold from Buy at Jefferies
Linde (LNEGY) downgraded to Neutral from Buy at Goldman
RetailMeNot (SALE) downgraded to Hold from Buy at Stifel


BNY Mellon (BK) initiated with a Hold at Deutsche Bank
CMS Energy (CMS) initiated with an Outperform at RW Baird
Durata Therapeutics (DRTX) initiated with a Buy at MLV & Co.
Dynagas LNG (DLNG) initiated with a Buy at Stifel
GasLog (GLOG) initiated with a Hold at Stifel
Golar LNG Partners (GMLP) initiated with a Buy at Stifel
Golar LNG (GLNG) initiated with a Hold at Stifel
Northern Trust (NTRS) initiated with a Hold at Deutsche Bank
State Street (STT) initiated with a Hold at Deutsche Bank


HP (HPQ) increased its workforce reduction forecast by 11,000-16,000 jobs, saying it now expects to lay off 45,000-50,000 employees, up from its prior estimate of 34,000, with 41,000 total to leave by the end of FY14
Barclays (BCS) fined $43.9M by FCA over gold price fixing
Starboard raised its stake in Darden (DRI) to 6.2% from 5.5%
Boeing (BA) acquired ETS Aviation, terms not disclosed
Keryx (KERX) said that the FDA extended the PDUFA date for Zerenex to September 7
Ziopharm Ad-RTS-IL-12 (ZIOP) said study shows precise control of IL-12 gene expression level


Companies that beat consensus earnings expectations last night and today include:
Cavco Industries (CVCO), Nordson (NDSN), Compuware (CPWR), Mentor Graphics (MENT), Marvell (MRVL), GameStop (GME), Ocean Rig UDW (ORIG), TiVo (TIVO), Aeropostale (ARO), Gap (GPS), Zumiez (ZUMZ)

Companies that missed consensus earnings expectations include:
Covisint (COVS), New York & Co. (NWY), Shoe Carnival (SCVL), 21Vianet (VNET)

Companies that matched consensus earnings expectations include:
Hibbett Sports (HIBB), Brocade (BRCD), Aruba Networks (ARUN), The Fresh Market (TFM), Ross Stores (ROST)

HP (HPQ) reports Q2 Personal Systems revenue up 7% YoY
GameStop (GME) backs FY14 EPS view $3.40-$3.70, consensus $3.68
GameStop (GME) sees Q2 EPS 12c-20c, consensus 17c
Aeropostale (ARO) sees Q2 EPS (61c)-(55c), consensus (50c)
Gap (GPS) backs FY14 EPS $2.90-$2.95, consensus $2.93


Google (GOOG) developing ‘cutting-edge’ tablet, WSJ reports
Sony (SNE) CEO vows again that TV unit will be profitable, Bloomberg reports
WWE (WWE) needs 1.3M-1.4M subscribers to make up for revenue loss, NY Post says
Apple (AAPL) wants Beats because streaming could ‘kill’ download sales, TechCrunch says
NTSB asks FAA to look into battery tests after 787 (BA) events, Bloomberg reports
Credit Suisse (CS) sells $5B worth of bonds since tax evasion suit, Bloomberg says
HSBC (HSBC) to face criticism over bonus payouts payments, The Independent reports


Agile Therapeutics (AGRX) 9.17M share IPO priced at $6.00
China Sunergy (CSUN) files to sell $45M of ordinary shares, warrants
Gold Resource (GORO) files to sell 4.1M shares for selling shareholders
Heritage Insurance (HRTG) 6M share IPO priced at $11.00
Matador (MTDR) files to sell 7.5M shares of common stock
Orbitz (OWW) 7.5M share Secondary priced at $6.60
Parsely Energy (PE) 50M share IPO priced at $18.50
Santander Mexico (BSMX) files to sell ADS for holders

via Zero Hedge Tyler Durden

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