Frontrunning: January 18

  • Foreign Hostages Die in Algeria’s Battle With Terrorists (Bloomberg)
  • The latest bank to soon join the currency wars: McCafferty Says BOE Must Keep Open Mind on New Policy Tools (Bloomberg)
  • US debt talks complicated by timing (FT)
  • BOJ eyes open-ended asset buying, agrees new inflation goal (Reuters)
  • AmEx Says U.S. Card Income Fell 42% as Loss Provisions Increased (BBG)
  • Call to raise age for US’s Medicare (FT)
  • Obama Promise to Raise Middle Class Living Already Seen in Peril (BBG)
  • China Exits Slowdown as Quarterly Growth Tops Forecasts (BBG) – actually, as new Politburo says to make it appear that way
  • Britain to drift out of European Union without reforms (Reuters)
  • Republicans weigh interim debt-limit hike (FT)
  • Abe’s aide says Japan shouldn’t fret if yen falls to 100 vs dlr (Reuters) … and it was 90 just a few days ago
  • PBOC May Seek More Liquidity Operations (Dow Jones)

Overnight Media Digest


* Former professional cyclist Lance Armstrong told the world Thursday
evening that he used performance-enhancing drugs to win seven Tour de
France titles.

* Algeria’s military launched a raid on Thursday
to free about 40 foreigners held by militants at a remote natural-gas
complex, leaving some hostages dead, surprising and angering several
governments and putting leaders across the world at a loss to determine
the fate of their citizens.

* In his final days as U.S. Treasury
secretary, Timothy Geithner reflected on the financial crisis and the
response he helped craft, in an interview with The Wall Street Journal.
Among other things, he said the government’s rescue of the financial
system was doomed to be unpopular.

* In approving Boeing Co’s
787 Deamliner to start carrying passengers in 2011, the Federal Aviation
Administration relied extensively on data generated by Boeing that
indicated the plane’s advanced lithium-ion battery systems — never used
before on a big jetliner — featured redundant safeguards that were
essentially foolproof.

* Rio Tinto Chief Executive Tom Albanese
agreed to step down on Thursday, the latest in a string of leaders
toppled by shifting fortunes at the world’s biggest mining companies.

Quarterly earnings reports released on Thursday underscore the
lingering illnesses afflicting some of the largest, best-known U.S.
banks and the comparatively ruddy health of some smaller regional

* Sony Corp has reached a deal to sell its U.S.
headquarters at 550 Madison Avenue for $1.1 billion, the company said on
Thursday, a strong price that shows how investors are bidding
aggressively for top Manhattan properties.

* Toyota Motor Corp
has settled what was to be the first in a group of hundreds of pending
wrongful death and injury lawsuits involving sudden, unintended
acceleration by Toyota vehicles.


In a drive for transparency, authorities in the Cayman Islands are planning on creating a public database of funds domiciled in the British territory for the first time.

Videogames seller Game Group is interested in acquiring stores from collapsed music retailer HMV, the CEO said.
As their mega-merger continues to go through regulatory clearance, Glencore and Xstrata are set to extend the deadline for the deal for a third time.

The British banking industry wants a deadline of May 2014 to be imposed for claims from customers who say they were mis-sold payment protection insurance, says one senior executive.

Barclays is considering whether it should recoup some or all of the 290 million pounds it was fined for Libor-rate rigging from the bonuses it is due to pay investment bankers in 2012.


* Hours after Algerian forces raided a gas facility, there was still no official word on the number of hostages freed, killed or still held by their Islamist kidnappers.

* In a televised interview with Oprah Winfrey, Lance Armstrong admitted to using banned substances but did not say how he did it or who helped him.

Thomas Weisel, who bankrolled Lance Armstrong through seven Tour de France wins, said in his first public comment on the matter that he never personally saw an instance of doping on the team.

* Most banks have recovered from the recent financial collapse, but two companies, Bank of America and Citigroup have reported continuing effects on earnings.

* AT&T warned that it would take a fourth-quarter charge of about $10 billion because of bigger-than-expected pension obligations.

* The Chinese economy picked up steam during the last few months of 2012, closely watched data from Beijing on Friday confirmed. But at the same time the figures underlined the view that the pace of future growth is likely to remain well below that seen in recent years.

* E*Trade Financial named Paul Idzik, a former executive at Barclays, as its new chief, ending a five-month search for a new leader.

* Norwegian Cruise Line Holdings has sold shares in itself at $19 apiece, a person briefed on the matter said, reaping about $446.5 million in proceeds.



–The State Electricity Regulatory Commission of China (SERC) said China’s power consumption could reach above 9 percent in 2013 from 5.5 percent in 2012.


–Fears over intellectual property lawsuits by foreign train technology companies will not derail exports of Chinese bullet trains, Vice Minister of Science and Technology Cao Jianlin said in an interview, dismissing copycat claims by Japan’s Kawasaki as “nonsense.”

–A former Japanese leader visited a memorial site to victims of Japanese wartime aggression, but analysts were quick to reject ay suggestion that Tokyo will change its policies toward China.


–China’s Railway Ministry said investment in railway could hit 650 billion yuan and that it will set a National Railway Development Fund as soon as possible.



* Two class action lawsuits were filed against the federal government in Canada after the human resources and skills development department lost a portable hard drive containing personal information about more than half a million people who took out student loans.

The department said last week the device contained data on 583,000 Canada Student Loans Program borrowers from 2000 to 2006.

* The federal ethics commissioner wants to talk to Finance Minister Jim Flaherty about his letter to the Canadian Radio-television and Telecommunications Commission (CRTC) after it was revealed that he wrote to the arm’s-length broadcast regulator in support of a constituent’s bid for a radio licence.

Reports in the business section:

* More Canadians went online to do their Christmas shopping this year, according to a new report by MasterCard Advisors.

Canadian consumers spent C$2.8 billion ($2.84 billion) shopping online in December, up 26 percent over the previous year and representing about 6.6 per cent of the month’s total retail sales.


* Three Quebec City teens have been arrested over charges of planning a shootout at their high school.

The three teens, two boys aged 14 and 15 and a 16 year old girl, who have pleaded not guilty, face charges of conspiracy to commit murder and will remain detained until a bail hearing on Monday.


* The blowout in price between Alberta’s heavy oil and the North American benchmark price is a “longer term issue” with no quick fix, Alberta Investment Management Corp (AIMCo) CEO Leo de Bever said.

Fly On The Wall 7:00 Market Snapshot


Upgrades (AMZN) upgraded to Outperform from Sector Perform at Pacific Crest
Cornerstone OnDemand (CSOD) upgraded to Buy from Neutral at Goldman
Credit Suisse (CS) upgraded to Overweight from Equal Weight at Morgan Stanley
Expeditors (EXPD) upgraded to Outperform from Neutral at Credit Suisse
Fabrinet (FN) upgraded to Overweight from Neutral at JPMorgan
Las Vegas Sands (LVS) upgraded to Outperform from Market Perform at Wells Fargo
Movado (MOV) upgraded to Buy from Neutral at Citigroup
Netflix (NFLX) upgraded to Buy from Neutral at Janney Capital
Qlik Technologies (QLIK) upgraded to Buy from Neutral at Goldman
Research in Motion (RIMM) upgraded to Buy from Hold at Jefferies
Tyson Foods (TSN) upgraded to Outperform from Market Perform at BMO Capital
Wynn Resorts (WYNN) upgraded to Outperform from Market Perform at Wells Fargo


Alterra Capital (ALTE) downgraded to Neutral from Buy at Sterne Agee
Ball Corp. (BLL) downgraded to Hold from Buy at Jefferies
CSX (CSX) downgraded to Neutral from Outperform at Credit Suisse
Capital One (COF) downgraded to Neutral from Buy at Janney Capital
Carrizo Oil & Gas (CRZO) downgraded to Underperform from Neutral at Credit Suisse
Clarcor (CLC) downgraded to Market Perform from Outperform at William Blair
Finisar (FNSR) downgraded to Underperform from Hold at Jefferies
MGM Resorts (MGM) downgraded to Market Perform from Outperform at Wells Fargo
NetSuite (N) downgraded to Neutral from Conviction Buy at Goldman
Ultimate Software (ULTI) downgraded to Neutral from Buy at Goldman
Visa (V) downgraded to Neutral from Outperform at RW Baird
Westamerica (WABC) downgraded to Underperform from Market Perform at BMO Capital


Geron (GERN) initiated with an Overweight at Piper Jaffray
Halcon Resources (HK) initiated with a Hold at Stifel Nicolaus
Harry Winston (HWD) initiated with a Buy at Nomura
Inovio Pharma (INO) initiated with an Overweight at Piper Jaffray
Intuitive Surgical (ISRG) initiated with a Buy at Janney Capital
Marathon Oil (MRO) initiated with a Buy at Stifel Nicolaus
Oncothyreon (ONTY) initiated with an Underweight at Piper Jaffray
Threshold Pharmaceuticals (THLD) initiated with a Neutral at Piper Jaffray
Tronox (TROX) initiated with a Buy at B. Riley Caris
Ziopharm (ZIOP) initiated with a Neutral at Piper Jaffray


GE (GE) on target to achieve dougle-digit earnings growth in 2013
Said outlook for developed markets remain uncertain
Sees growth in China, resource rich countries
Weiss family raised American Greetings (AM) offer to $17.50 from $17.18 per share
Moody’s changed Rite Aid (RAD) outlook to positive from stable
Schlumberger (SLB) said global macroeconomic environment remains uncertain
Sees 2013 global oil demand similar to 2012
Liberty Media (LMCA) bought 50M shares of Sirius XM (SIRI), control above 50%
Intel (INTC) ”excited about strong pipeline of products coming to market”
Sees little growth in wireless in 2013
Capital One (COF) sees average quarterly revenue levels in 2013 like Q412
Sees reduction in loan balances in 2013
Sony Corporation of America (SNE) sold 550 Madison Avenue building for $1.1B
AZZ Inc. (AZZ) sees FY14 margins remaining strong
ONEOK Partners (OKS) announced $465M-$500M project investments through 2015
NuPathe’s (PATH) Zecuity approved by FDA


Companies that beat consensus earnings expectations last night and today include:
General Electric (GE), Schlumberger (SLB), Xilinx (XLNX), Bank Mutual (BKMU), Intel (INTC), Wintrust Financial (WTFC)

Companies that missed consensus earnings expectations include:
Matthews (MATW), People’s United (PBCT), Capital One (COF)

Companies that matched consensus earnings expectations include:
Wipro (WIT), Associated Banc-Corp (ASBC), American Express (AXP)


GE (GE) is the world’s top producer of aircraft engines and medical-imaging equipment, but as far as its profits are concerned, it’s very much a bank. GE Capital is expected to account for nearly half the company’s 2012 profit, the Wall Street Journal reports
Dell’s (DELL) potential $23B leveraged buyout could also be the deal that finally gets the leveraged-buyout machine going again, showering financiers in fees and potentially yielding big returns for investors, the Wall Street Journal reports
Americans are more confident in the future and are increasingly striking out to set up their own homes, a move that is helping propel the housing recovery, Reuters reports
When U.S. natural gas producers release their 2012 annual reports, many companies may have to significantly reduce a key indicator of their financial health: reserves. The SEC
requires companies to calculate and report year-end oil and gas reserves using 12-month average prices, Reuters reports
With the worst flu outbreak since 2009 gripping the U.S., vaccine makers (GSK, AZN) are determined to do better next season. They’re developing powerful vaccines that hold the promise of cutting incidences of flu by the thousands, Bloomberg reports
Franklin Templeton Investments (BEN) reduced its holdings of Apple (AAPL) last year to 4.2% from 7% in 2011 on concern the maker of the iPhone lacks a strategy to sell cheaper smartphones in emerging markets such as China and India, Bloomberg reports


CyrusOne (CONE) 16.5M share IPO priced at $19.00
Northern Tier (NTI) Energy 10.7M share Secondary priced at $24.46
Norwegian Cruise Line (NCLH) 23.529M share IPO priced at $19.00
SunCoke Energy (SXCP) 13.5M share IPO priced at $19.00
Trius Therapeutics (TSRX) files to sell common stock

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