• Cyprus Salvaged After EU Deal Shuts Bank to Get $13B (BBG)
• Last-minute Cyprus deal to close bank, force losses (Reuters)
• Anxious, angry Cypriots face uncertain future (Reuters)
• Spain Brings the Pain to Bank Investors (WSJ)
• First Switzerland now... U.S. Seeks Answers in Liechtenstein on Tax Cheats (BBG)
• Rebel Free Syrian Army founder loses leg in Syria blast (Reuters)
• European Stocks Rise on Cyprus Deal as Italian Bonds, Crude Gain (BBG)
• Michael Dell Likely to Sweeten Buyout Bid to Save Legacy (BBG)
• Bankers’ pay premium is narrowing (FT)
• Surgery Restoring Penis After Prostate Cancer Increasing (BBG)
• Silent or supportive, conservatives give gay marriage momentum (Reuters)

Overnight Media Digest

WSJ

* Cyprus secured a bailout from its international creditors early on Monday, ending a week of financial panic that threatened to see the small island nation become the first government to leave the euro zone.

* The euro surged against other major currencies on Monday in Asia trading after Cyprus secured a bailout from its international creditors.

* China Petroleum & Chemical Corp agreed to form a joint venture that will acquire $3 billion in oil and gas assets held by its state-owned parent in countries including Kazakhstan, Colombia and Russia. ()

* Apple Inc has acquired the indoor-GPS company WifiSLAM for about $20 million, a sign that a war over indoor mobile-location services is heating up.

* The Spanish government will impose heavy losses on investors at nationalized banks and hire external advisers to help it manage these banks' assets, its latest efforts to overhaul a financial sector battered by the collapse of a decadelong housing boom.

* JaguarLand Rover, which is owned by India's Tata Motors Ltd, on Sunday strongly denied it is preparing to raise $1 billion from Chinese investors with a bond issue in Beijing or Shanghai later this year.

* Private equity firm Gordon Brothers Europe agreed to buy the British arm of DVD-rental firm Blockbuster LLC, which had entered a form of bankruptcy in January.

* Some former partners of Howrey LLP have agreed to spend the next several months in settlement talks to avoid litigation over the defunct law firm's 2011 collapse.

FT

Cyprus, the European Union and the International Monetary Fund reached a tentative agreement that would lead to the shutting down of the country's second largest bank, according to EU officials.

British Police found no evidence of third-party involvement during searches of former Russian oligarch Boris Berezovsky's home near London on Sunday, but the tycoon's death remained shrouded in mystery.

Dell Inc appeared to have received competing offers following a $24.4 billion agreement last month under which it would be taken private by its founder Michael Dell and private equity firm Silver Lake, setting up a tug-of-war for the world's No. 3 PC maker.

Blockbuster's chain of film and computer game rental shops in Britain has been sold to Gordon Brothers Europe for an undisclosed sum, two months after the struggling retailer went into a form of bankruptcy protection.

French drinks maker Pernod Ricard will report an annual decline in Scotch whisky sales in China after years of growth.

Pakistan's former President, Pervez Musharraf, returned home on Sunday after nearly four years of self-imposed exile apparently to contest elections despite the possibility of arrest and death threats from the Taliban.

NYT

* After hours of meetings in Brussels, European officials agreed to a deal to rescue Cyprus that would drastically reduce the size of the country's banking sector and scrap the controversial tax on bank deposits.

* Private equity firm Blackstone Group LP and investor Carl Icahn have each separately submitted preliminary takeover proposals for Dell Inc, the embattled computer maker.

* News Corp wants the U.S. Federal Communications Commission to waive a ban on consolidation between TV stations and newspapers in local markets, but it is not without setbacks.

* At the U.S. Supreme Court on Monday, generic and brand-name drug companies will be arguing against the federal government on whether the maker of a brand-name drug can pay a generic-drug company to keep the generic version off the market.

* Bausch & Lomb Inc, the eye-care company, said in an initial public offering registration filing that Warburg Pincus LLC would continue to own a majority of the stock after the offering.

* Wall Street is taking America's biggest pension fund Calpers to court this week, for a long-awaited battle over who takes the losses when a city goes bust - workers and retirees, municipal bondholders, or both.

* Taking a page from China, the United States is now scouring high schools for hackers with an eye to bringing them along to one day defend the nation from foreign attack.

* Web-publisher Spin Media LLC will introduce technological improvements to encourage readers to linger and to track them as they move from one device to another

Canada

THE GLOBE AND MAIL

* Canada's credit unions, an often overlooked corner of the financial sector, are about to get a lot more vocal and aggressive as they attempt to take market share from the big banks, while also fighting Ottawa on controversial tax changes that threaten their business.

* Not a single new casino has been built yet in Ontario, but government plans for increasing the number of gambling establishments have slashed the financial worth of existing casinos, resulting in the loss of millions of tax dollars for several municipalities.

Reports in the business section:

* BlackBerry investors will get a clear view of whether the sleek, touchscreen devices - hailed as the best BlackBerrys ever - are tumbling from store shelves in enough numbers to bolster the company's flagging sales.

NATIONAL POST

* If money talks, then it's saying Justin Trudeau has a lock on the federal Liberal leadership while Joyce Murray and Martha Hall Findlay are fighting over who'll finish second. His team has told The Canadian Press it will show Trudeau has pulled in just over $1 million since launching his campaign last October.

* As the 20 patients in Pisa, Italy, waited to undergo thyroid surgery, they descended into unconsciousness thanks to a cocktail of anaesthetic drugs delivered from a surprising destination.

The infusion machines in Pisa were controlled remotely by specialists in Montreal, a unique experiment in "transcontinental anaesthesia" that could eventually make operations safer in isolated communities, a new study indicates.

FINANCIAL POST

* Without much fanfare, WestJet Airlines Ltd has been quietly rolling out some strategic changes to its fleet of Boeing 737s in recent weeks, altering the cabin configuration fairly dramatically to add a new class of seating, all the while packing in more travelers in the rest of its planes

China

PEOPLE'S DAILY

-- Chinese President Xi Jinping's visit to Russia last week has strengthened comprehensive and strategic cooperation between the two world powers.

CHINA SECURITIES JOURNAL

-- The China Banking Regulatory Commission has warned banks to pay more attention to risk while lending to nine sectors, including real estate, machinery engineering, steel, wind power equipment and photovoltaic industry, which the regulator said have been suffering from overcapacity.

-- Several institutions expect Chinese regulators to cut domestic gasoline and fuel prices as early as March 27, which would be the first such cut in China this year.

SHANGHAI SECURITIES NEWS

-- Shareholders of Wuhan Iron and Steel Co Ltd have approved a plan to raise 15 billion yuan ($2.4 billion) via a private placement of shares to purchase mineral assets from its parent firm.

-- The China Insurance Regulatory Commission has raised the threshold for insurance companies to set up branches.

CHINA DAILY

-- Foreign telecom companies are keen to join China's fourth generation (4G) mobile network deployment with the country looking likely to issue licenses as early as this year.

-- China may see an increase in property transactions involving international investors this year, fuelled by the country's economic recovery and the promising outlook of its real estate market, industry experts said.

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Aixtron (AIXG) upgraded to Hold from Sell at Canaccord
Allstate (ALL) upgraded to Buy from Neutral at Goldman
Array BioPharma (ARRY) upgraded to Overweight from Neutral at Piper Jaffray
Endocyte (ECYT) upgraded to Outperform from Neutral at RW Baird
Royal Bank of Scotland (RBS) upgraded to Neutral from Sell at Goldman
Rubicon (RBCN) upgraded to Buy from Hold at Canaccord
Saul Centers (BFS) upgraded to Outperform from Neutral at RW Baird
Veeco (VECO) upgraded to Buy from Hold at Canaccord
W. R. Berkley (WRB) upgraded to Neutral from Sell at Goldman

Downgrades

AXIS Capital (AXS) downgraded to Neutral from Buy at Goldman
Airgas (ARG) downgraded to Underperform from Neutral at BofA/Merrill
BlackBerry (BBRY) downgraded to Neutral from Buy at Goldman
Finish Line (FINL) downgraded to Underperform from Neutral at Sterne Agee
J.C. Penny (JCP) downgraded to Underperform from Market Perform at BMO Capital
Lear (LEA) downgraded to Buy from Conviction Buy at Goldman
Life Technologies (LIFE) downgraded to Neutral from Buy at Citigroup
PartnerRe (PRE) downgraded to Sell from Neutral at Goldman
Patterson-UTI (PTEN) downgraded to Market Perform from Outperform at Raymond James
RenaissanceRe (RNR) downgraded to Sell from Neutral at Goldman
SPX Corp. (SPW) downgraded to Hold from Buy at Deutsche Bank
SPX Corp. (SPW) downgraded to Neutral from Overweight at JPMorgan
Sigma-Aldrich (SIAL) downgraded to Underperform from Neutral at BofA/Merrill
Textron (TXT) downgraded to Neutral from Overweight at JPMorgan
Virtusa (VRTU) downgraded to Neutral from Overweight at JPMorgan
WABCO (WBC) downgraded to Neutral from Overweight at JPMorgan
Whole Foods (WFM) downgraded to Neutral from Overweight at Piper Jaffray

Initiations

Bristow Group (BRS) initiated with an Overweight at JPMorgan
Comcast (CMCSA) reinstated with a Buy at Goldman
Coronado Biosciences (CNDO) initiated with a Buy at Canaccord
Corporate Executive Board (CEB) initiated with a Buy at SunTrust
Eagle Rock Energy (EROC) coverage resumed with a Market Perform at Wells Fargo
Galena Biopharma (GALE) initiated with a Buy at Needham
Lexington Realty (LXP) initiated with a Hold at KeyBanc
Rentech Nitrogen (RNF) initiated with a Neutral at Goldman

HOT STOCKS

The Eurogroup reached an agreement with the Cypriot authorities on key elements necessary for a future macroeconomic adjustment program
Dell (DELL) to negotiate with Carl Icahn and Blackstone (BX), CNBC reports
Vanguard Health’s (VHS) Phoenix, Arizona health plan subsidiary received a letter from the Arizona Health Care Cost Containment System that it was not awarded an acute care program contract for the program year commencing October 1
Actavis (ACT) reached an agreement with AstraZeneca (AZN) to launch generic Crestor in 2016
Sinopec’s (SNP) board passed a resolution to form a $3B, 50:50 joint venture between the two wholly-owned subsidiaries of the company and the company

EARNINGS/GUIDANCE

Companies that missed consensus earnings expectations include:
JA Solar (JASO)

NEWSPAPERS/WEBSITES

• Dell’s (DELL) financial services unit could be valued at about $5B in a sale, sources tell the Wall Street Journal, adding that General Electric's (GE) financial services unit has been viewed as the likely buyer of the Dell unit. Blackstone's (BX) expression of interest in Dell is said to include partly financing any deal by selling Dell’s financial services arm.
• BlackBerry's (BBRY) all-touchscreen Z10, which has been seen as critical to help resurrect the company's standing in the market, went on sale in the U.S. Friday at AT&T (T) stores, but the launch has so far failed to garner the buzz of competitors' recent smartphone launches, the Wall Street Journal reports.
• Vodafone (VOD) is said to be forming a deal to sell its entire share in Verizon Wireless, its venture with Verizon Communications (VZ), netting it as much as $135M, or GBP88.6M, the Telegraph reports.
• A security hole at Apple (AAPL) would allow anyone to reset your password with an email address and date of birth, reports The Verge.

SYNDICATE

Bausch & Lomb (BOL) files IPO for $100M in common stock
PGT, Inc. (PGTI) files to sell common stock
RDA Microelectronics (RDA) announces offering of 8.35M ADS

It is no surprise that pension funds in the US are significantly underfunded (median 72% funded). California Public Employees’ Retirement System (CALPERS), specifically, is about 26% short of meeting its long-term commitments. Like most major pension funds, it uses smoke-and-mirrors to avoid this yawning gap by smoothing over a long enough timeframe where'hope' for growth in assets triumphs over the reality of liabilities (through a 'rolling' 15- or 30-year window - that therefore never comes due). However, under a new plan proposed by CALPERS' chief actuary, they will shorten the horizon from 15 to 5 years and aim for a specific date 30 years from now to be 100% funded (instead of a rolling hope-driven horizon). The impact of this, as Bloomberg reports, may mean California taxpayers municipal pension contributions will rise as much as 50%. "This is clearly the right thing to do," notes the fund's CEO, "as it will reduce the risk of the system," though we suspect the 'system' may just get a little upset at having to face this 50% 'tax-hike'.

Via Bloomberg,

California taxpayers may see the municipal pension contributions they fund for the California Public Employees’ Retirement System rise as much as 50 percent under a plan to fill $87 billion in unfunded obligations.

 

Alan Milligan, the fund’s chief actuary, recommends that the biggest U.S. pension stop spreading out losses and gains over 15 years and instead set rates based on how much is needed to reach 100 percent funding within 30 years

 

The Sacramento-based pension, known as Calpers, is about 26 percent short of meeting its long-term commitments. The state and cities contributed $7.8 billion in the last fiscal year, almost four times more than a decade earlier.

 

...

 

Under Milligan’s proposal, the fund would shrink its 15- year rolling period for asset smoothing to five years and amortize gains and losses over a fixed 30-year period rather than the current rolling 30-year period. A fixed period means that all obligations will be fully funded by a specific date.

 

If approved, the rates charged to governments would increase by as much as 50 percent.

 

...

 

“This will reduce the risk our system currently faces,” said the fund’s chief executive officer, Anne Stausboll. “This is clearly the right thing for us to do.”

 

...

 

The median funded status of state pensions, meaning how much money a system has in order to pay its obligations, fell to 72 percent in 2011 from 83 percent in 2007, according to data compiled by Bloomberg.

Sadly, not much in terms of macro observations this quarter or discussions of jelly donuts, but a whole lot on the fund's biggest Q1 underperformer, Apple and the hedge fund's ongoing fight for shareholder friendly capital reallocation as well as proving Modigliani-Miller wrong. And then this cryptic ellipsis: "Under the circumstances, it is curious that gold isn’t doing better."Say no more, David. We get it.

In other positional news, Greenlight closed out longs in XRX and ESV and shorts in AVB and MBI. Greenlight also initiated a long position in Germany EVK (ahead of public listing). It appears Greenlight is still long Green Mountain.

From Greenlight Capital, as of May 8

Dear Partner:

The Greenlight Capital funds (the “Partnerships”) returned 5.8%1, net of fees and expenses, in the first quarter of 2013.

It was a quarter of reversal: Marvell Technology Group (MRVL), our biggest loser in 2012, was our biggest winner this quarter. Yen puts, our biggest losing position in both 2010 and 2011, were our next biggest winner. On the other hand, Apple (AAPL), a top three winner in 2011 and 2012, was our biggest loser.

Overall, it was a decent start to the year with a good risk-adjusted return. It’s unlikely for us to keep up with the sort of one-way market that we saw in the first quarter, where the S&P 500 never suffered more than a trivial weekly decline. Our long portfolio roughly matched the S&P 500, we had a modest loss in our short portfolio, and macro was positive. We are four years into an economic recovery. Corporate earnings, which grew steadily during the initial stages of the recovery, are now growing anemically. The market advance can be better explained by investors convincing themselves that extraordinarily accommodative monetary policy is bullish for stocks. Unconventional monetary policy is now a global phenomenon.

The Japanese government replaced its conservative central banker with a more aggressive one. This regime change has led Japan into the global battle to see who can debase their currency the fastest and this drove our gains in Yen puts, as the Yen weakened from ¥86.74 to ¥94.19 against the dollar.

Now every major central bank is fully engaged in aggressive, unconventional policy. It seems that as each bank implements a new experiment without immediate consequence, the new policy is deemed safe, if not effective. Other central bankers notice and, acting in the philosophy of ‘Anything you can do, I can do better,’ take turns in one-upmanship. This serially correlated behavior smacks of bubble mentality. But investors are currently complacent about the unintended consequences of central bank money printing, and like most investment cycles and fads, this will persist until it doesn’t. Under the circumstances, it is curious that gold isn’t doing better.

AAPL shares fell from $532 to $443 during the quarter. The biggest problems with our AAPL investment are disappointing earnings and a diminished forecast. When AAPL announced its year-end result, it made clear that it would earn less in the March quarter than it did a year ago. Forward estimates have been falling for a while. Last July, consensus estimates for fiscal 2014 were $64 per share; estimates now stand at $44. When we thought the company would earn $64 per share, the shares seemed cheap even as they reached $700 in September. Of course, that required AAPL to meet that forecast.

Our thesis is that AAPL has a terrific operating platform, engendering a loyal, sticky and growing customer base that will make repeated purchases of an expanding AAPL product offering. Unfortunately, there have been a series of disappointments including slower sales growth, lower margins, and increased competition. There have also been delays in new carrier wins, next generation product introductions, and new product category launches. While all of these have had an understandably negative impact on AAPL’s share price, we take a longer view and believe our thesis is intact.

As shareholders, we watched AAPL accumulate a cash stockpile greater than the market capitalization of all but 17 companies in the S&P 500, and recognized that its high cost of capital and shareholder-unfriendly capital allocation were depressing the stock price. AAPL’s management and Board, either unconcerned or unaware of the detrimental effects of AAPL’s all common equity capital structure, seemed uninterested in finding a solution.

As shareholders who believe in AAPL’s core business, we wanted to help AAPL resolve its cash problem in a way that satisfied AAPL, the market, and its shareholders. Based on years of observation and many discussions, we believed that AAPL would not issue debt under any circumstances, and especially not to return cash to shareholders. With this in mind, coupled with our awareness that AAPL was loath to repatriate (and thereby pay taxes on) its overseas cash, last year we suggested iPrefs to Peter Oppenheimer, AAPL's CFO. We had no better luck than any of the many other investors and analysts who for years have pressed Apple to return excess capital to shareholders. Our concerns fell on deaf ears.

In February, CalPERS came out in loud support of a proposal aimed at improving AAPL’s corporate governance that inexplicably bundled several measures into a single voting measure. The proposal, which included an unwarranted provision prohibiting AAPL from issuing preferred stock, was in direct violation of SEC rules, and we filed a lawsuit insisting that AAPL allow the shareholders to vote on each measure separately. We believed this would generate a public dialogue around AAPL’s capital allocation strategy.

When Tim Cook later called the lawsuit a sideshow, it was understandable. Whereas we chose to focus on the very real issue of Apple’s capital structure, others seemed more intent on turning things into a circus. A lawyer known mostly for preserving the autonomy of Boards to act in any manner they wish wrote a piece titled Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy. Given the hysteria implied in the title, one would think we had suggested that AAPL hire Steve Ballmer to run new product development. A retired Fortune 500 CEO said “I’d give Einhorn the back of my hand,” prompting us to wonder why he wouldn’t give us the front of his hand. Perhaps most startling was the reaction from CalPERS, who vigorously defended the proposal.

The essence of corporate governance is form over substance. The belief is that properly-made decisions will lead to better decisions, so it was odd to watch self-identified corporate governance advocates support a proxy proposal that violated SEC rules. Incongruously, CalPERS believes good corporate governance is unnecessary when approving policies that purport to improve corporate governance.

Others ignored the circus and focused on the balance sheet. We received feedback from many AAPL shareholders, including some of AAPL’s largest institutional investors, thanking us for initiating the public discussion. Even some who disagreed with our idea helped further the public debate. Respected NYU finance professor Aswath Damodaran wrote a critical piece that pushed us to refine our presentation of the iPrefs idea. These thoughtful responses reinforce the value of speaking publicly, despite the more obvious drawbacks.

In the end, the judge sided with us, and AAPL withdrew the proposal from consideration. Once the shareholder meeting passed, there was nothing left for a court to do, so the case became moot and was dropped. Not long after, we met with AAPL management and its investment bankers to further discuss AAPL’s options. We believe that our thoughts were given a fair hearing.

Ultimately, the Board and AAPL decided to abandon their “no debt” philosophy and gave birth to iBonds. As rejections go, AAPL’s bond issuance ($17 billion in bonds were issued at about a 2% average interest cost) was as good as anything shareholders could have hoped for and the market seems to agree. AAPL announced that it will return $100 billion to shareholders by the end of 2015 and will evaluate returning additional capital annually. This vastly more shareholder-friendly capital allocation policy is a dramatic shift from where AAPL stood just a few months ago. We have added to our AAPL position. We now await the release of Apple’s next blockbuster product.

The other significant loser in the quarter was Green Mountain Coffee Roasters (GMCR). We would love to be the “Credentialed Bear” that gets invited to ask tough questions at its annual shareholder meeting, but we aren’t waiting by our iPhones. Shares of GMCR increased from $41.34 to $56.76 in the quarter.

In addition to MRVL and the Yen, Vodafone (UK: VOD) was another material winner during the quarter. It is now clear that Verizon does in fact want to buy VOD’s 45% interest in Verizon Wireless. We can hear them now. We believe that a premium sale followed by a successful return and/or redeployment of the proceeds could unlock substantial value latent in VOD stock. VOD without Verizon Wireless might also become a good acquisition target for AT&T. During the quarter VOD shares advanced from £1.54 to £1.87.

MRVL reversed its 2012 decline as investors began to pay attention to MRVL’s prospects for share gains in controllers for hard disk drives and flash memory drives, as well as its new processor for cell phones and tablets. The company should see significant fixed operating leverage in 2013, as it has been carrying the cost of the investments in these products without any corresponding revenue until now. The company has also continued to buy back stock aggressively, adding to the potential earnings leverage.

We initiated a long position in Evonik (Germany: EVK), a global chemical business, through a private placement at an effective price of €29.13 per share, ahead of a public listing in April. EVK has a high quality portfolio of chemical assets in the U.S., Europe and Asia, including market leadership in methionine, a high margin, high structural growth business that tracks the demand for animal feed. EVK’s business is less cyclical than that of its European peers as demonstrated by its positive EBITDA growth each year even during the recession. EVK is currently in the middle of a capital investment cycle that we believe will enable it to grow its earnings power from €2.50 in 2012 to €4.00 per share in 2015/2016. We think that its combination of secular growth, superior asset quality, and low cyclicality makes EVK the premier European chemical company, which deserves a rerating to a premium multiple.

We initiated a long position in Oil States International (OIS), a solutions provider for the oil and gas industry, at an average price of $77.16 per share. OIS has four business segments: Well Site Services, Tubular Services, Offshore Products, and Accommodations.

We believe that the company trades at a significant discount to the sum of its parts. Though the shares trade at slightly less than 7x 2013 EBITDA (a multiple typically associated with its lower multiple businesses), the majority of its profits come from Accommodations, which is a high growth, high return-on-capital segment that deserves a much higher valuation. At 8.6x 2013 EBITDA, an appropriate multiple given a sum of the parts analysis of OIS’s business mix and where comparable companies trade, OIS would be worth close to $120 per share. We believe that OIS could unlock significant shareholder value by converting the Accommodations unit into a REIT and separating it from the rest of the company; if completed, it would suggest a valuation of $155 per share.

We closed several positions during the quarter including longs in Ensco (ESV) and Xerox (XRX), and shorts in Avalon Bay (AVB) and MBIA (MBI).

We bought ESV, an offshore contract oil driller, after the Macondo oil spill. At the time, we believed that the shares were depressed over fears of curtailed offshore drilling. Subsequently, the fears were resolved and the drilling business recovered. We earned a 34% compounded return over our 4+ year holding period. The return was helped by favorable trading around the position. We sold in order to redeploy the capital into OIS.

XRX did not perform as well as we had hoped. We bought the shares based on expectations that synergies from its acquisition of Affiliated Computer Services would lead to revenue growth and margin improvement. Unfortunately, the company did not deliver.

Despite this, we sold the shares for a modest gain.

We finally gave up on our short of AVB. Our initial short in early 2007 worked nicely during the credit crisis, but we overstayed our welcome. It is a mediocre business with cyclical risk and an extreme valuation due to its REIT nature. Nonetheless, the company recently acquired Archstone  properties and issued a lot of stock. The shares declined from their recent highs and we took the opportunity to admit defeat and exit with a loss.

During the quarter, we finally declared victory on our MBI short, which we have held in some capacity since 2002. It was rough sledding for the first five years until the stock collapsed from $76 to $2 between 2007 and 2009. This was another case of a misunderstood business and a management team engaged in assorted accounting and business chicanery. While it is possible that sleepy regulators will ultimately put this company and its management out of their misery, the opposite seems equally possible. We’ve decided to enjoy the healthy profit we made and step aside for the time being. Cumulatively, this was the third most profitable short position in our history.

* * *

“So long as public funds ultimately are governed by the government, which is controlled by representatives of the general public, risk tolerance is subject to the general public’s risk tolerance, and the general public’s risk tolerance is not necessarily high. If and when the stock market collapses and performance goes negative for some time, people, the media and politicians will complain loudly... Who exactly is responsible for the future payment of benefits? Those who make the promise today may not be the people to actually deliver on the promise in future decades. It is much easier to make a promise that somebody else is supposed to carry out. Here the future generation is not in a position to sign the contract at all. This is the critical agency problem.”

          -  Yuji Kage, former CIO, Pension Fund Association

Now that the BOJ's "interventionalism" in the capital markets is increasingly losing steam, as the soaring realized volatility in equity and bond markets squarely puts into question its credibility and its ability to enforce its core mandate (which, according to the Bank of Japan Act "states that the Bank's monetary policy should be aimed at achieving price stability, thereby contributing to the sound development of the national economy) Japan is left with one wildcard: the Government Pension Investment Fund (GPIF), which as of December 31 held some ¥111.9 trillion in assets, of which ¥67.3 trillion, or 60.1% in Japanese Government Bonds. Perhaps more importantly, the GPIF also held "just"¥14.5 trillion in domestic stocks, or 12.9% of total, far less than the minimum allocation to bonds (current floor of 59%). 

What the GPIF has going for it is that with a total asset size of just about $1.1 trillion, it is the largest government pension fund in the world. It is almost equal to the size of Korea's economy, has nearly six times as much assets under management as CALPERS, the biggest US pension fund, and nearly four times as much as Europe's largest pension plan, Stichting Pensioenfonds ABP of the Netherlands. Which means that the mere whisper of capital reallocation sends assorted asset classes scrambling.

It is this massive potential buying dry powder that has led to numerous hints in the press (first in Bloomberg in February, then in Reuters last week, and then in the Japanese Nikkei this morning all of which have been intended to serve as a - brief - risk-on catalyst) that a capital reallocation in the GPIF is imminent to allow for much more domestic equity buying, now that the threat of the BOJ's open-ended QE is barely sufficient to avoid a bear market crash in the Nikkei in under two weeks.

There are some problems, however.

The first of which, is that GPIF appears to be a "jack of all trades" when it comes to its potential utility. It was only in March that HSBC wrote in "Japan's trillion dollar bond rotation" that "there is clearly a bias to shift more public funds into international markets", and that "Crucially, the GPIF is conducting a review to accelerate divestments in domestic bonds in favour of EM." Wait, reallocation from domestic bonds into international markets, and specifically bonds? Oh yes, that's because back then Europe needed backstopping and the mere threat of a Japanese carry trade tsunami was sufficient to send peripheral bond yields plunging to near record lows (despite Europe's imploding economy).

Fast forward to today, when we now learn that this mythical reallocation from domestic into international bonds has been put on hiatus (PIIGS yields plunging notwithstanding), and has been replaced by a new narrative - one which is suddenly the much more critical, and Abenomics preserving one: reinvesting out of domestic bonds and into domestic stocks, thus providing a backstop to the BOJ. Problem is, cry capital-reallocating wolf enough times, and soon someone will demand to see proof before taking you at your word.

This problem is compounded by another problem: as we wrote several years ago, in 2010, due to the demographic crunch of Japanese society, the GPIF became, for the first time ever, a net asset seller. This can be seen on the charts below.

Worst of all, and as can be very vividly seen on the charts below, not only has the GPIF been consistently leaking assets in the past four years, it has already been actively reallocating away from bonds: in fact, at 60.1% of total assets, the JGB holdings as of December 31 a % of total assets are the lowest they have been in decades (and just above the 59% threshold), while the allocation to domestic stocks has soared from 12.3% in Q3 to 14.5% in Q4: the highest in two years. Just how much dry powder does this pension fund really have before it literally bets the bank on the riskiest of all asset classes, and - in the off chance it bets incorrectly - dooms tens of millions of people to retirement in poverty? So the GPIF needs a reallocation program?  Sounds to us like it needs to invest more into JGBs!

Total GPIF assets:

Relative GPIF assets:

So will the GPIF indeed scramble to reallocate into equities or is this merely the latest bluff in a long series of pseudo-political gambits? Here are some thoughts from HSBC on this issue:

Domestic equities might be an obvious target for the reallocation of assets, especially if the impressive rally in the Nikkei continues. But Japanese investors will be very reluctant to immediately pile into the local stock market. The asset bubble that burst more than 20 years ago left its mark. More than half of households’ USD15trn financial assets were kept in cash as of September 2012 and only 6% in equities, according to BoJ data. Other significant domestic holders of JGBs such as banks and pension funds will also be constrained to match liabilities and meet regulation requirements, implying bond investments, including overseas bonds, are more likely than equity investments.

Well that's great for Spanish bonds, but does nothing to help what may soon be the next great Japanese equity market bubble. 

But wait, it gets worse.

As we have been showing over the past several weeks, suddenly a far bigger problem that has emerged for Japan is not what happens to the Nikkei, but whether it suffers an out of control collapse in its bond market, and sees a rapid, vicious and sharp sell off in the JGB complex as nearly happened on May 23, the day when the the Nikkei225 crashed. It is this that is the biggest structural threat to Abenomics, not whether or not Mrs. Watanabe will have generated enough money daytrading to avoid the 20% price surge in McDonalds.

So if indeed the GPIF does reallocate into equities (a very big if considering its multi-functional usage depending on the dry-powder threat need du jour), it will have to sell JGBs. Even more than it has sold so far. Which will then precipitate yet another rout in the JGB market, from where we go into such issues as the "VaR shock" we described two weeks ago (a topic the FT caught up with today), and all too real capital losses for Japanese banks who mark JGBs on a MTM basis.

Here is what HSBC had to say on this issue:

There is also an asymmetric risk to JGB yields in the very long term (ie beyond the next couple of years), making diversification compelling on a risk-adjusted basis. If official policies in Japan begin to bite and inflation rises on a more sustainable basis, this would place pressure on interest rates and materially reduce the value of JGBs held by banks. Yet, given the scale of such holdings, reducing exposure to JGBs would be difficult. Japanese financial institutions hold a substantial amount of JGBs. According to the BIS, Japanese banks hold 90% of their tier 1 capital in JGBs. Japan’s largest bank, Bank of Tokyo-Mitsubishi, has already acknowledged that reducing its USD485bn holdings of JGBs would be disruptive for the markets

Wait, what? Let's read more from the FT, shall we:

Nobuyuki Hirano, chief executive of Bank of Tokyo-Mitsubishi, admitted that the bank’s Y40tn ($485bn) holdings of Japanese government bonds were a major risk but said he was powerless to do much about it....The risk facing Japanese banks from their vast holdings of government bonds has been underlined by the chief executive of the country’s largest bank who said it would struggle to reduce its exposure.

Well that's not good: if the largest Japanese bank can't handle what may soon be concerted selling by one of the largest single holders of JGBs, who can? And what can be done then?

Oh, that's right: this is where Kuroda's plea to please not sell bonds, just to buy stocks comes into play. The problem is only the BOJ can come up with money out of thin air, for everyone else buying something, means selling something else first. So unfortunately unless the BOJ wishes to further increase its QE, which will be needed to absorb all the selling without a surge in yields (something Kyle Bass warned about last week), a move which however would further break the connection between bonds and inflation expectations, and further destabilize the equity, FX and bond markets.

So in short: Japan's Plan B is not only not a panacea, but it is a House of BondsCards that would not survive an even modest gust of wind, and an even more modest contemplation into its true internal dynamics. We would urge Messrs Abe and Kuroda to come up with a fall back plan to the fall back plan before it, once again, becomes too late.

Finally, for those who just can't get enough, we recommend the following piece by James Shinn for Institutional Investor which should explain all lingering questions about what really goes on at Japan's Plan B.

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

There is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off.

1. Long term interest rates began a secular decline in 1981. This continued until at least early this year. 

2. In the early 1990s state and local politicians and their nominees began awarding management contracts to RIAs (Registered Investment Advisor) who promised higher rates of return. These promises were eagerly accepted at face value since it allowed them to reduce their annual contribution for defined benefit pension plans and spend the money elsewhere.
#1 plus the Reagan bull market made it possible to present this as fiscally responsible, or at least as progressive. Over the same period of time private corporations tended to shift to defined contribution plans for new hires. iow they ceased underwriting market risk for their pension funds. State and local governments will eventually be forced to follow this example. 

Where Mish writes: "Pension plans typically assume 7.5% returns. That's not going to happen on a sustained basis with 10-year treasuries yielding close to 2%. Yet, any significant rise in bond yields will crush existing bondholders as well as wreak havoc in equities," he's underestimating the return assumption for a great many pension plans. CALPERS & CALSTRS (California public employee pension plans) are functionally at 8% or higher. 

3. As a consequence of 1 & 2 defined benefit pension plans (along with charitable endowments) began a long-term movement out of bonds. The portfolio percentage allocations to stocks, followed by other forms of equity, began shooting up. Why would they not? The last time 30-year Treasuries saw 8% was in late 1994. It was already crystal clear by 1996 that investing in bonds was just a way to slowly sink into insolvency.
We're not on any "brink." It took two decades to get into this systemically insolvent condition. And I don't think this situation will produce further market instability. It's already been the main catalyst of market volatility since the mid 1990s in my second hand educated opinion. The dot.com and subprime housing bubbles could never have gotten so big without the participation of public and non-profit funds heaving hundreds of billions around in a chase for investment grade high yield.
In other words, the real casino action started at the precise moment that planning IRRs exceeded the 30-year US Treasury Bond rate. 

What happens next? Probably a lot of things will happen. This particular crisis will revolve around defined benefit state and local government employee pension funds. It was created in the political arena and that's where it will be resolved.
I think the Democratic Party will be the most affected. The public employee unions are a core constituency and produce most of the ground troops for the Democrats. Broadly speaking there are two approaches. These are; 1) obtain more money and 2) reduce benefit payouts. 

1. Obtain More Money.
a. Raising taxes (primarily targeting Republicans) will be the attempted default of Democrat single party states. But the crisis is most acute in precisely those single party Democratic states with the highest taxes already. It is therefore not clear this approach will really raise more money. It could equally create a large refugee movement of targeted taxpayers fleeing these jurisdictions, thus producing lower net revenues overall. The available demographic data says this process is well underway in California.
b. Shift appropriations between budget lines. This means reducing money for schools, police, highway maintenance, welfare et al and transferring it to pension funds. This will create conflict inside the Democratic party between key constituency groups.
c. Get the Federal government (or Federal Reserve) to undertake direct bailouts. This is going to create conflict between Democratic and Republican states over issues of federalism and "transfer payments". 

2. Reduce Benefit Payouts.
Recent events in Wisconsin show the potential for this action to create extreme political unrest.
I have long been watching this situation as a potential vector for political collapse.

In sum: there is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off.

• So much for the euphoria: Stores open early on Thanksgiving but shoppers in no rush (Reuters)
• Get to work Mr. Chairwoman: Do-Nothing Congress Dithers on Budget as Deadline Nears (BBG)
• FX to Libor Probes Leave U.K. Traders Looking for Lawyers (BBG)
• Protesters Briefly Storm Thai Army Headquarters (WSJ)
• Berlusconi accused of bribing witnesses in prostitution trial (Reuters)
• Japan Price Gauge Rises Most Since ’98 in Boost to Abe (BBG)
• S&P downgrades Netherlands’ AAA credit rating (FT)
• GrainCorp Verdict Clouds Australia Open-For-Business Pledge (BBG)
• Hertz Fix in Dollar Thrifty Deal Fails as Insider Warned (BBG)
• Narrow Budget Agreement Comes Into View (WSJ)
• Billionaire Agarwal Regrets $8 Billion Aluminum Spending (BBG)
• No Door-Busters Here: Small Merchants Tread Cautiously on Black Friday (WSJ)
• Prisoners Fight U.S. Over Repatriation From Guantanamo Bay (WSJ)
• Structured credit: They’re back! Leveraged super seniors return (Euromoney)
• Brazil's OGX Asks for More Help (WSJ)

Overnight Media Digest

WSJ

* Investors are piling into bets against the yen, taking another run at a trade that proved lucrative for some of the industry's largest money managers earlier this year.

* Fortress Investment and Centerbridge Partners have shown interest in LightSquared, the wireless venture that is up for sale in bankruptcy proceedings. The private-equity firms, both with penchants for buying distressed assets, have each expressed interest to LightSquared in acquiring the company's spectrum - the limited pockets of airwaves that telecommunications firms need to operate wireless networks.

* Brazil's OGX wants to persuade creditors to put up more money as it strives to avoid outright failure. The oil company posted a third-quarter loss of nearly $1 billion.

* An attempt by regulators to prevent the kind of lax underwriting that exacerbated the financial crisis is running into resistance from corporations, investors and asset managers who said new rules will cripple a $300 billion market for loans to U.S. companies.

* UBS is shaking up its investment bank, and has removed a top foreign-exchange executive, amid a burgeoning investigation into potential manipulation of currency markets.

* Australia blocked a $2.7 billion bid by U.S. agribusiness company Archer Daniels Midland to buy grain handler GrainCorp Ltd, saying a takeover would go against the national interest.

* Negotiators in Congress are moving toward a narrow agreement on this year's federal budget that would scale back some spending cuts set to take effect in January but likely wouldn't ask either party to compromise on its core stands on taxes and entitlements.

* A former top executive at UBS AG who has been sitting in an Italian jail for about a month is headed to the U.S. to face charges that he helped Americans evade taxes by stashing their money in Swiss bank accounts.

FT

David Cameron's government faces accusations of a soft stance on human rights issues in China. An investigation by the Financial Times casts doubts over groups with Chinese backing that are looking to fund projects in the UK.

The Bank of England announced pulling off stimulus to mortgage lending and personal loans, popularly known as the Funding for Lending scheme.

Lloyds Banking Group is likely to announce the appointment of Lord Norman Blackwell as its new chairman replacing outgoing chairman Sir Win Bischoff in 2014.

Barclays is set to announce new salary structure for Chief Executive Antony Jenkins as the European Union imposed bonus caps early this year. Based on the revamped plan, Jenkins will get a part of his salary in shares next year.

Hedge fund Aurelius Capital Management has sold most of its stake in Co-operative Bank, which has recently restructured its debt, sources told The Financial Times.

Private equity firm Apollo Global Management is the preferred bidder for a 400 million pounds UK property of Aviva, sources told The Financial Times.

NYT

* The struggle of low-income workers, many in retailing, is adding momentum to efforts to increase the federal minimum wage.

* Many retailers didn't wait for the predawn hours of Black Friday this year. They were open before breakfast on Thanksgiving Day, and customers were waiting.

* The Swiss bank UBS is combining its currency, interest rates and credit trading businesses into one unit, according to a memo circulated at the bank earlier this month.

* Calpers and Calstrs, the giant employee and teachers' pension funds in California, and others are beginning to take a more aggressive role in the operation and election of corporate boards of companies they have invested in.

* The French telecommunications company Orange has reached an agreement to sell its Dominican Republic operations to the Luxembourg cable and broadband provider Altice for $1.4 billion.

* Jon Horvath, the federal government's star witness in an insider trading case, said his former boss, Michael Steinberg, wanted him to cross a legal line.

Canada

THE GLOBE AND MAIL

* A delicate balancing act is playing out among the growing number of retailers in Canada offering deep Black Friday discounts. The challenge is to slash prices and lure shoppers, and still come out in the black.

* Quebec child-protection authorities are in talks with their counterparts in Ontario to determine the fate of 14 children in an ultra-Orthodox Jewish community who have been ordered into foster homes.

* A New Brunswick Mountie is questioning his employer's decision not to allow him to smoke medically prescribed marijuana while in uniform. Corporal Ronald Francis told the CBC that he received a prescription for medical-grade marijuana earlier this month to help treat his post-traumatic stress disorder. He is allowed three grams of marijuana a day, although he said that he does not usually use that much.

Reports in the business section:

* Entrepreneurs seeking to launch a western discount carrier say their recipe to woo budget-minded travelers will start with two planes in the summer of 2014. Canada Jetlines Ltd describes its proposal to open an ultra low-cost carrier as a strategy to meet demand from bargain hunters turned off by higher fares charged by Air Canada and WestJet Airlines Ltd .

* Cable operator Cogeco Cable Inc is promising it will fight any large fee increases that follow the NHL's blockbuster agreement to sell its Canadian broadcasting rights to Rogers Communications Inc, an early sign of the friction the C$5.2-billion deal could create.

NATIONAL POST

* With temperatures beginning their inevitable plunge below freezing on Thursday, Canada, one of the world's coldest nations, reminded its citizens to wear a hat, a scarf and "something to keep your face warm."

* With no prospect of continuing their short-lived TV talk show, the Ford brothers are planning to take their concept to YouTube, Councillor Doug Ford said on Thursday. In the aftermath of a series of scandals, U.S. and Canadian production houses have flooded Mayor Rob Ford's office, said his brother, all pitching a reality show concept. Councillor Ford said they have passed on all offers.

FINANCIAL POST

* In a stunning miss of budgetary forecasts that will trigger credit rating reviews, the Quebec government has pushed back its goal of wiping out its budget deficit by two years.

* Quebec's professional engineering association is vowing to "clean house" and sanction crooked members as revelations of corruption and shady business liaisons continue to surface almost daily in the province's construction industry.

China

CHINA SECURITIES JOURNAL

- Twenty-five more policies for the planned Shenzhen Qianhai economic zone have been submitted for approval, according to an unnamed government official.

- China could allow eligible financial corporations to issue bonds, said Li Jianhua, a senior official at the China Banking Regulatory Commission.

SHANGHAI SECURITIES

- The China Securities Regulatory Commission will support banks to issue preferred shares in future, said Jia Wenqin, a senior official of CSRC's accounting department.

CHINA DAILY

- President Xi Jinping has urged officials to push forward with reforms but avoid being rash and reckless in the process.

PEOPLE'S DAILY

- Government workers need to take concrete actions, not just words, said a commentary in the paper that acts as the party's mouthpiece.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Commerzbank (CRZBD) upgraded to Equal Weight from Underweight at Morgan Stanley
Concha Y Toro (VCO) upgraded to Buy from Neutral at Citigroup
Prudential plc (PUK) upgraded to Outperform from Market Perform at Keefe Bruyette
Rentokil (RTOKY) upgraded to Buy from Neutral at BofA/Merrill

Downgrades

Experian (EXPGY) downgraded to Sell from Neutral at Goldman
Remy Cointreau (REMYF) downgraded to Sell from Hold at Societe Generale
Remy Cointreau (REMYF) downgraded to Sell from Neutral at Citigroup
Renren (RENN) downgraded to Underperform from Hold at Jefferies
Volvo (VOLVY) downgraded to Underweight from Equal Weight at Morgan Stanley

Initiations

Antofagasta (ANFGY) initiated with an Outperform at Bernstein

HOT STOCKS

Archer Daniels (ADM) said 'disappointed' by rejection of GrainCorp (GRCLF) application
KKR (KKR), Gland Pharma announced partnership
Rio Tinto (RIO) to suspend production at Gove alumina refinery
DSS Technology (DDS) filed patent lawsuit against Apple (AAPL)
Vale (VALE) said will pay back tax bill for overseas operations to Brazil, Reuters reports

NEWSPAPERS/WEBSITES

• An attempt by the Fed, SEC and other regulators to prevent the kind of lax underwriting that exacerbated the financial crisis is running into resistance from corporations, investors and asset managers (WFC, WEN, DNKN, JCP, SEAS) who said new rules will cripple a $300B market for loans to U.S. companies, the Wall Street Journal reports
• Dish Network’s (DISH) $2.2B bid for LightSquared can go forward with the involvement of Dish Chairman Charlie Ergen, a Nevada judge ruled. Separately, Fortress Investment Group (FIG) and Centerbridge Partners have shown interest in LightSquared, the Wall Street Journal reports
• Amazon.com (AMZN) has no intention of bowing to pressure from striking workers in Germany, its second biggest market behind the U.S., and is more concerned about bad weather hurting Christmas deliveries, Reuters reports
• Exxon Mobil (XOM) turned over a 25% stake in Iraq's West Qurna-1 oilfield project to China energy company PetroChina (PTR), said Iraq's deputy prime minister for energy, Reuters reports
• Morgan Stanley (MS) is set to take the top spot in Japanese M&A’s for the first time in 16 years, a sign the firm’s three-year-old tie-up with Mitsubishi UFJ Financial Group (MTU) is paying off. Goldman Sachs (GS) is second, Bloomberg reports
• Sotheby’s (BID) is bringing works by Picasso, Rembrandt and Zao Wou-Ki to Beijing where it will hold its first mainland commercial auction on December 1. The auction house said it’s offering $212M worth of western and Chinese art, jewelry and furniture, Bloomberg reports

ACTIVIST/PASSIVE FILINGS

Brave Warrior Advisors reports 5.7% passive stake in Higher One (ONE)
Gabelli raises stake in Mocon (MOCO) to 8.34% from 6.94%
Greenwoods reports 4.9% passive stake in Noah Holdings (NOAH)

• Presidential Task Force Recommends Overhaul of NSA Surveillance Tactics (WSJ)
• Monte Paschi's Largest Shareholder Says It Will Vote Against $4.1 Billion Capital Increase (WSJ)
• SAC Reconsiders Industry Relationships—and Its Name (WSJ)
• Icahn’s Apple Push Criticized by Calpers as ‘Johnny Come Lately’  (BBG)
• In Yemen, al Qaeda gains sympathy amid U.S. drone strikes (Reuters)
• Missing American in Iran was on unapproved mission (AP)
• In China, Western Companies Cut Jobs as Growth Ebbs (WSJ)
• U.S. lays out steps to smooth Obamacare coverage for January (Reuters)
• Las Vegas Sands Said to Drop $35 Billion Spanish Casino Proposal (BBG)
• Twitter Reverts Changes To Blocking Functionality After Strong Negative User Feedback (TechCrunch)
• U.S. Video-Game Hardware Sales Rise on New Consoles (BBG)
• Stolper makes Bloomberg: Goldman Sachs Goes Against Consensus in Dollar Call (BBG)
• Chinese men try to steal U.S. seed technology (Reuters)

Overnight Media Digest

WSJ

* A presidential task force has drafted recommendations that constitute a sweeping overhaul of the National Security Agency, according to people familiar with the recommendations. The panel's draft proposals would change the spy agency's leadership from military to civilian and limit how it gathers and holds the electronic information of Americans.

* Airplanes are unlikely to be filled with passengers talking on cellphones anytime soon, after the Obama administration signaled it would keep a ban on calls in place.

* Major wireless carriers committed on Thursday to allowing consumers to keep their cellphones when they switch providers, in a voluntary move backed by federal regulators. AT&T Inc , Sprint Corp, T-Mobile USA Inc, U.S. Cellular Corp and Verizon Wireless signed on to the agreement, which requires carriers to "unlock" devices or ask manufacturers to do so within two days of receiving a consumer's request.

* Facebook Inc's Instagram app is launching a photo- and video-messaging service, soon after popular mobile app Snapchat spurned a $3 billion offer from the social network.

* Apple Inc's major supplier Foxconn hasn't reduced overtime hours at some of its factories to meet the legal requirement in China, the Fair Labor Association said in a report.

* Google Inc's hopes of settling its high-profile antitrust case in the European Union suffered a setback as rivals and consumer groups blasted its latest proposal for resolving the EU's competition concerns.

* Coca-Cola Co is shaking up its senior management, announcing late Thursday that its Americas chief is leaving. The sudden departure of Steve Cahillane, once viewed as a potential successor to Chief Executive Muhtar Kent, comes as the maker of Minute Maid orange juice, Powerade sports drinks and its namesake cola struggles to grow in its key U.S. market and faces slowing sales in Brazil and Mexico.

* A U.S. bankruptcy judge ruled Anadarko Petroleum Corp could be liable for at least $5 billion in a lawsuit over environmental and legal liabilities related to its 2006 acquisition of Kerr-McGee Corp.

* Jones Group Inc is nearing a deal to sell itself to private-equity firm Sycamore Partners, according to a person familiar with the matter, in a takeover that would value the footwear and apparel maker at roughly $1.2 billion.

* Americans spent more freely as the holiday shopping season opened, reflecting renewed consumer strength that could boost economic growth next year. Retail sales rose a seasonally adjusted 0.7 percent in November from October, marking the biggest gain since June, the Commerce Department said Thursday. The prior month's gain was revised up to 0.6 percent from 0.4 percent.

* Netflix is trying to better understand your binge-viewing habits. The company on Friday will reveal a snapshot of a phenomenon that is reshaping TV culture-viewers devouring shows in long jags, episode after episode.

FT

German banking regulator Bafin has demanded documents from Deutsche Bank as part of a probe into suspected manipulation of benchmark gold and silver prices by banks, according to people familiar with the matter.

After a new contribution from JPMorgan Chase & Co, funds set up for victims of Bernard Madoff's Ponzi scheme should recover almost three-quarters of the $17.5 billion of losses.

Bank of Japan Governor Haruhiko Kuroda said the central bank would keep its highly expansionary monetary policy in place until inflation hits and stabilises at its 2 percent target.

European financial watchdogs have warned of the "violent fluctuations in electronic currencies" consumers face by using virtual currencies such as Bitcoin, the price of which has fluctuated between $340 and $1,240 in the past week.

Tom Enders, chief executive of Europe's largest aerospace company EADS, has warned that Europe will have to buy its next fighter jet from the U.S. or Asia if it does not invest in its own defence industry and allow sector consolidation.

An audit of operations at Foxconn Technology Group , best known for assembling Apple Inc's iPhones, has found that workers still do more overtime than permitted by Chinese labour law.

NYT

* The United States Treasury called on Thursday for a greater federal role in the regulation of insurance, particularly in areas like mortgage insurance, the collection and use of personal data to set prices, and the use of secretive entities known as captives to keep risks off the books of insurers.

* The fallout from the bursting of the housing bubble continues to plague Wall Street. Bank of America agreed on Thursday to pay the Securities and Exchange Commission a $131.8 million penalty to settle an investigation linked to the structuring and sale of two complex mortgage securities that its Merrill Lynch division sold to investors.

* Wall Street financiers have occasionally been referred to as sharks or snakes. But on Thursday, one prominent firm was associated with entirely different kinds of cute and lovable critters. About a dozen kindergartners, and a few high-powered financiers, gathered at the Blackstone Group's Midtown Manhattan headquarters to get up close with eight animal ambassadors from Sea World, the theme park operator that the firm took public this year.

* The Energy Department will give a small company in Corvallis, Ore., up to $226 million to advance the design of tiny nuclear reactors that would be installed under water, making meltdown far less likely and opening the door to markets around the world where the reactors now on the market are too big for local power grids.

* Graduate teaching and research assistants at New York University have voted overwhelmingly to unionize, the American Arbitration Association announced this week after conducting the vote.

* In what could be the biggest economic change in two decades, President Enrique Pena Nieto is on the verge of rewriting the Constitution to open Mexico's oil, gas and electricity industry to private investment - a provocative move expected to lure international oil companies and expand North America's energy supply while testing the grip oil has on Mexico's soul.

* When Spotify, the digital music company of the moment, announced an exclusive deal with Led Zeppelin and free access on mobile devices, it also reported impressive numbers. Its listeners have streamed 4.5 billion hours of music this year, and it has paid more than $1 billion in music royalties since its founding. But Spotify, a private company, did not disclose how many people use the service and how many pay for it.

* Verizon Communications has taken an aggressive stance against a proposed shareholder resolution that would require it to be more forthcoming about the customer information it shares with the government.

Canada

THE GLOBE AND MAIL

* The Conservative government's decision to approve major cuts at Canada Post was driven by concern that the Crown Corp was just months away from becoming a major drain on Ottawa's bottom line.

* Quebec authorities are calling it a first - an elected official coming forward to denounce people after being the target of alleged corruption. The province's anti-corruption squad, known as UPAC, is giving Chateauguay Mayor Nathalie Simon full marks for filing a complaint with police this past September.

Reports in the business section:

* Canada is heading for a gridlock in energy development that will rob the country of future wealth unless it can solve vexing environmental and aboriginal conflicts, a blue-ribbon group including senior Calgary business people warned in a new report.

* The Canada Pension Plan Investment Board is making a foray into the booming Canadian agriculture business with the $128-million purchase of a portfolio of Saskatchewan farmland from Assiniboia Farmland LP.

* Another high-flying Canadian startup backed by deep-pocketed U.S. venture capitalists has hit an impressive milestone - although it admits it's still a long way off from generating profits or meaningful revenues.

Kik Interactive, a Waterloo, Ontario-based instant messenger service started in 2009, said on Thursday that it now had more than 100 million registered users, a 233 percent increase in 12 months, and ahead of rival BlackBerry Messenger.

* Bank of Canada Governor Stephen Poloz used a speech in Montreal to set the record straight: He is not as dovish as many have thought; nor does he talk the dollar down to boost exports and listless inflation.

NATIONAL POST

* Toronto City Councillor Doug Ford has been accused of vote buying after he was filmed handing out $20 bills to public housing residents. It's the second time in a week he has faced accusations of using his personal wealth for political gain.

* The commander-in-chief of the Canadian Forces, Governor General David Johnston, says the military and country must do more to treat post-traumatic stress disorder and prevent suicides among soldiers, explaining a "stiff upper lip" attitude needs to be overcome to help treat soldiers and veterans with mental illness.

FINANCIAL POST

* Canada's telecom regulator said on Thursday that it would take a closer look at the rates cellphone providers charge their competitors to roam on each others' networks, something it said the country's big players could be using to kill competition from new entrants.

* U.S. hedge fund Golden Tree Asset Management LP increased its stake in Postmedia Network Canada Corp last month and now owns 39 percent of the newspaper chain's shares. The New York City-based fund is Postmedia's largest shareholder and in November it bought a further 4 percent of the company's Class B shares, according to a Dec. 4 regulatory filing.

China

CHINA SECURITIES JOURNAL

- China's first and second-tier property market is cooling following the implementation of policies to control pricing, according to data and industry insiders. Prices will continue to fall in the coming months, insiders predicted.

CHINA BUSINESS NEWS

- China's small and medium commercial banks now need to apply for operating licenses, according to an announcement by the China Banking Regulatory Commission (CBRC). The aim is to tighten regulation over the services provided by such banks, said an unnamed CBRC source.

SHANGHAI SECURITIES NEWS

- A simulated stock option trial in China will involve four companies including Industrial and Commercial Bank of China Ltd and China Petroleum & Chemical Corp, broker sources said. The trial will also involve the launch of call and put option contracts.

CHINA DAILY

- There are currently around 3,000 government WeChat accounts across mainland China, Hong Kong and Macau, as China looks to make use the popular social media application to improve communication with citizens.

- Over 600 children's products failed to meet quality standards, China's industry watchdog said this week. The watchdog said 644 items, including toys, clothes and diapers, from 571 manufacturers were substandard.

PEOPLE'S DAILY

- China should unite to help build the "China dream", which is to achieve national prosperity, said a commentary in the paper that acts as the Party's mouthpiece. This dream embodies the aspirations of several generations of Chinese people and the overall interests of the nation, it said.

SHANGHAI DAILY

- A total of 24 Chinese provinces levied more than 20 billion yuan ($3.29 billion) in fines for extra births in 2012, but did not disclose how they spent the money. Ten other provinces have not yet published figures.

- The average salary in China is set to rise between 6 and 10 percent in 2014, a survey from recruiter Michael Page showed. Over 60 percent of respondents said they expected to raise salaries by this amount next year, while a further 18 percent eyed double-digit growth.

Britain

The Telegraph

GLG FINED $9 MLN FOR OVERVALUING STAKE

One of London's largest hedge funds, GLG Partners, has been fined $9 million after it allegedly told investors that its assets were worth $160 million more than they really were.

EGGBOROUGH COAL PLANT CLOSURE 'WOULD PUSH UP BILLS'

Household energy bills could be pushed higher if Eggborough power plant, which supplies 4 percent of the UK's power, is forced to close, the company has claimed.

The Guardian

CENTRICA-LED CONSORTIUM POISED FOR IRISH ENERGY TAKEOVER

A consortium led by Centrica, the owner of British Gas, has been made preferred bidder by Irish ministers to take control of the state-owned energy group, Bord Gais Energy, for around 1 billion euros ($1.38 billion).

FORMER CITY MINISTER MYNERS JOINS CO-OP GROUP BOARD ON 1 POUND SALARY

Former minister Myners is to lead the overhaul of the management structure of the Co-operative Group after scandals at its banking arm that have seen control ceded to its bondholders and its former chairman accused of using illegal drugs.

G4S AND SERCO HAND OVER OFFENDER TAGGING CONTRACTS OVER FRAUD CLAIMS

Security companies G4S and Serco are to hand over their contracts to electronically tag criminals following fraud allegations over the way they charged the government.

EE THREAT TO RURAL 4G BROADBAND IF SPECTRUM FEES ARE QUADRUPLED

Britain's largest mobile network EE has waded into the cost of living debate, saying if the government continues to raise spectrum fees and clamp down on mobile charges it will have to scale back plans to bring 4G mobile broadband to rural areas.

The Times

BIG FOUR AUDITORS FACING REVIEW

The Big Four accountancy firms are failing to properly question the books of banks and building societies despite being told to raise their game after the financial crisis.

SPORTS DIRECT GETS SHIRTY OVER KIT DISPUTE

Billionaire retailer Mike Ashley is tangled in a dispute with adidas after the German sportswear manufacturer refused to supply the Chelsea kit to Sports Direct next season.

The Independent

AT THE BANK OF ENGLAND, NOT EVERYONE AGREES WITH MR CARNEY

A Bank of England rate-setter yesterday said that Threadneedle Street's flagship forward guidance policy was likely to have had little impact on the economy and appeared to clash with Governor Mark Carney over the timing of possible rate rises.

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Advance Auto Parts (AAP) upgraded to Top Pick from Outperform at RBC Capital
Amazon.com (AMZN) upgraded to Strong Buy from Buy at ISI Group
ArcelorMittal (MT) upgraded to Outperform from Market Perform at Cowen
athenahealth (ATHN) upgraded to Outperform from Market Perform at Leerink
athenahealth (ATHN) upgraded to Strong Buy from Outperform at Raymond James
Bed Bath & Beyond (BBBY) upgraded to Neutral from Cautious at ISI Group
Broadridge (BR) upgraded to Outperform from Market Perform at Keefe Bruyette
Charles Schwab (SCHW) upgraded to Market Perform from Underperform at Keefe Bruyette
Ciena (CIEN) upgraded to Outperform from Market Perform at BMO Capital
FedEx (FDX) upgraded to Strong Buy from Outperform at Raymond James
LPL Financial (LPLA) upgraded to Outperform from Market Perform at Keefe Bruyette
Omnicell (OMCL) upgraded to Buy from Neutral at B. Riley
Quiksilver (ZQK) upgraded to Buy from Neutral at B. Riley
Seagate (STX) upgraded to Buy from Neutral at Citigroup
Sibanye Gold (SBGL) upgraded to Neutral from Sell at UBS
SunCoke Energy (SXC) upgraded to Buy from Neutral at BofA/Merrill
U.S. Steel (X) upgraded to Outperform from Market Perform at Cowen
Western Digital (WDC) upgraded to Buy from Neutral at Citigroup

Downgrades

Anadarko (APC) downgraded to Underweight from Neutral at JPMorgan
Anglo American (AAUKY) downgraded to Hold from Buy at Deutsche Bank
BP (BP) downgraded to Neutral from Buy at UBS
CounterPath (CPAH) downgraded to Hold from Speculative Buy at Canaccord
Iberdrola (IBDRY) downgraded to Sell from Neutral at Goldman
Ipsen (IPSEY) downgraded to Neutral from Buy at Goldman
RWE AG (RWEOY) downgraded to Neutral from Buy at Goldman
Restoration Hardware (RH) downgraded to Neutral from Overweight at Piper Jaffray
lululemon (LULU) downgraded to Neutral from Outperform at Credit Suisse

Initiations

Avago (AVGO) initiated with an Outperform at Oppenheimer
Axcelis (ACLS) initiated with a Buy at B. Riley
Baker Hughes (BHI) initiated with a Neutral at RW Baird
Blue Capital (BCRH) initiated with an Outperform at Raymond James
Brixmor (BRX) initiated with a Buy at Deutsche Bank
China Mobile Games (CMGE) initiated with a Buy at Brean Capital
Coca-Cola (KO) initiated with a Buy at Janney Capital
Cott Corp. (COT) initiated with a Neutral at Janney Capital
Dr Pepper Snapple (DPS) initiated with a Buy at Janney Capital
Federated National (FNHC) initiated with a Neutral at Janney Capital
FireEye (FEYE) initiated with an Outperform at FBR Capital
FormFactor (FORM) initiated with a Neutral at B. Riley
Gazprom (OGZPY) initiated with an Underperform at Credit Suisse
Halliburton (HAL) initiated with a Neutral at RW Baird
Hilton Worldwide (HLT) initiated with a Neutral at SunTrust
Kaiser Aluminum (KALU) initiated with a Neutral at Goldman
LTX-Credence (LTXC) initiated with a Buy at B. Riley
OFG Bancorp  (OFG) initiated with a Buy at Guggenheim
Post Holdings (POST) initiated with a Buy at Citigroup
Proofpoint (PFPT) initiated with an Outperform at FBR Capital
Schlumberger (SLB) initiated with an Outperform at RW Baird
Tableau Software (DATA) initiated with a Market Perform at FBR Capital
TriMas (TRS) initiated with a Neutral at Goldman
Ubiquiti Networks (UBNT) initiated with an Outperform at Wells Fargo
Valero Energy (VLO) reinstated with a Neutral at Credit Suisse
Weatherford (WFT) initiated with a Neutral at RW Baird

HOT STOCKS

BlackBerry (BRY) extended purchase option deadline on convertible debt (FRFHF)
Simon Property (SPG) announced plan to spin off strip center business
EchoStar (SATS), GVT (VIVHY) ended talks for Brazilian JV
Las Vegas Sands (LVS) no longer pursuing Spain development, will continue in Asia
U.S. federal court ruled in favor of Tronox (TROX), Anadarko (APC) found liable, will appeal
United Technologies (UTX) said FY14 outlook 'stretched but achievable'
Adobe (ADBE) expects to surpass 4M subscribers by end of FY15

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Restoration Hardware (RH)

Companies that missed consensus earnings expectations include:
SAIC (SAIC)

Companies that matched consensus earnings expectations include:
Adobe (ADBE)

NEWSPAPERS/WEBSITES

• Google’s (GOOG) hopes of settling its high-profile antitrust case in the EU suffered a setback as rivals and consumer groups (MSFT, NOK, TRIP) blasted its latest proposal for resolving the EU's competition concerns, saying they would do next to nothing to improve competition in online search, the Wall Street Journal reports
• DirectTV (DTV) is exploring the idea of an online video service that would appeal to "price-sensitive" young people or other customers who have dropped their pay-TV service, the Wall Street Journal reports
• SEC Chairman White says her team will not shy away from high-stakes trials, and not just strike settlements with wrongdoers, but a string of recent court setbacks shows she has her work cut out for her, Reuters reports
• Singapore's defense minister said his country was seriously considering buying Lockheed Martin Corp.'s (LMT) F-35 fighter jet but was in "no particular hurry" to buy new jets, Reuters reports
• The Louisiana Sheriffs’ Pension and Relief Fund, an IBM (IBM) shareholder, sued claiming the company’s cooperation with a National Security Agency eavesdropping program hurt investors as China sales dropped, Bloomberg reports
• McGraw Hill Financial’s (MHFI) Standard & Poor’s said it would be unfair to let the Justice Department put more than 150 selected securities before a jury to argue the firm’s ratings were the result of fraud, Bloomberg reports

SYNDICATE

Cheniere Energy Partners LP (CQH) 36M share IPO priced at $20.00
Fidelity & Guaranty Life (FGL) 9.75M share IPO priced at $17
Macquarie Infrastructure (MIC) 2.125M share Secondary priced at $52.50
Nimble Storage (NMBL) 8M share IPO priced at $21.00
Response Genetics (RGDX) files automatic common stock offering
TCP Capital (TCPC) files to sell 3.75M shares of common stock
XOMA (XOMA) files to sell common stock, no amount given

• Ukraine leader denounces coup bid, West weighs sanctions (Reuters)
• Time to buy Imodium calls: Kuroda Easing Doomed as Yen Seen Missing 120 Level (BBG)
• Teens Disappear From U.S. Workforce (BBG)
• Fed Sets Rules for Foreign Banks (WSJ)
• Quant Funds Feel Investor Bite After Underperforming (BBG)
• China Probes Qualcomm, InterDigital Over Monopoly Concerns (WSJ)
• Capital One says it can show up at cardholders' homes, workplaces  (LATimes)
• SEC Gains Power to Take Profit Made From Insider Trading (BBG)
• China Unveils New Bank Liquidity Rules After Repeated Cash Squeezes (WSJ)
• California pension rate hikes loom after Calpers vote (Reuters)
• How a CEO Reacts When Robert Redford Pegs Him a Villain (BBG)

Overnight Media Digest

WSJ

* General Motors Co is accelerating efforts to field a largely aluminum-bodied pickup truck by late 2018, under pressure from federal fuel efficiency standards and archrival Ford Motor Co, according to people familiar with the matter.

* Coca-Cola Co, the world's largest beverage firm, missed its yearly growth goals and warned that weaker foreign currencies will lower its operating profit 7 percent this year.

* The New York attorney general plans to announce a settlement with U.S. units of Ranbaxy and Teva Pharmaceutical Industries Ltd over allegations the generic drug makers made an unlawful agreement to restrict competition.

* President Barack Obama on Tuesday ordered his administration to develop and implement new fuel-efficiency standards for medium and heavy-duty commercial trucks by March 2016.

* Americans are beginning to take advantage of easier lending conditions after years of shedding debt, fueling a rise in borrowing that could prop up a shaky economic recovery. ()

* The Arkansas House failed to pass legislation to continue a state program that used Medicaid dollars to enroll low-income residents in private health insurance, throwing the future of the nationally watched program into doubt.

* Seven years after a Supreme Court ruling cleared the way for federal regulation of greenhouse gases, justices will consider whether the agency has stretched its powers too far in applying new emissions rules.

* AT&T Inc received requests on national security grounds for detailed information for at least 35,000 customer accounts in the first six months of 2013, the company disclosed.

* Raising the federal minimum wage to $10.10 per hour would cost the U.S. economy about 500,000 jobs by late 2016, but the increase would lift 900,000 Americans out of poverty at the same time, according to a new study.

FT

Private equity companies look to gain from Europe's road to recovery as the initial public offerings market starts the year with listings worth $8.3 billion, making 2014 the busiest beginning of the year since the financial crisis.

Diageo Plc, the world's biggest spirits company has warned against Britain leaving the European Union, crediting the bloc's global trade deals for the company's whisky exports success.

MetLife said it would sell its bulk annuity unit, MetLife Assurance, to Goldman Sach's-backed Rothesay Life. The sale is expected to be completed in the second quarter of 2014.

Essar Energy's plans to delist shares may have been triggered by a drastic share price fall since their listing and meetings with disappointed long-term investors before Christmas, people involved in the matter said.

U.S.-based activist hedge fund SpringOwl said on Tuesday that it has agreed in principle to buy about 6.1 percent in Bwin.Party, a move that could lead to a break up of the online gaming party.

NYT

* Homeowners who are trying to avert foreclosure are confronting problems on a new front as the mortgage industry undergoes a shift.

* King Digital Entertainment, the maker of the addictive puzzle game Candy Crush Saga, filed on Tuesday to list its shares on the New York Stock Exchange.

* A popular Democratic proposal to raise the minimum wage to $10.10 an hour, championed by President Obama, could reduce total employment by 500,000 workers by the second half of 2016.

* Senator Charles Schumer, Democrat of New York, has recused himself from reviewing Comcast Corp's agreement to buy Time Warner Cable after the revelation that his brother, the lawyer Robert Schumer, worked on the merger.

* David Einhorn has filed a lawsuit seeking to unmask the identity of an anonymous financial blogger who, he says, disclosed that Einhorn's hedge fund was buying shares in a technology company.

* Foreign banks with a major presence on Wall Street will no longer be allowed to avoid many of the tougher rules that the United States introduced after the financial crisis to prevent banking failures and bailouts.

* Corporations should expect an onslaught of enforcement proceedings from investigations into overseas bribery, manipulation of financial benchmark rates and the issuance of toxic mortgage securities. The question is how much money the government will demand as part of the inevitable settlements, a figure that is difficult to calculate.

Canada

THE GLOBE AND MAIL

* The head of Canadian Pacific Railway Ltd, Hunter Harrison, called for an immediate ban of the type of older rail cars that exploded in the Lac-Megantic disaster and suggested that trains will become more attractive targets for terrorists if rail companies are forced to tell the public what dangerous goods they are carrying.

* BlackBerry Ltd says it's "outraged" by a T-Mobile U.S. Inc offer aimed at luring some of its customers to the rival Apple Inc iPhone. BlackBerry's new chief executive officer John Chen, was referring to T-Mobile's attempt to get some of its users to switch smartphones, a move that backfired and sent the wireless carrier scrambling to make good.

Reports in the business section:

* The fizz has gone out of the soft-drink business, forcing producers to search for alternative sources of revenue - but even some of those are showing limited growth potential. From Coca-Cola Co to PepsiCo Inc to private-label Cott Corp, soda makers are struggling with declining North American demand for their core carbonated drinks and counting more on other products to diversify and draw back customers.

* The British Columbia government unveiled its tax regime for liquefied natural gas exports, providing an industry framework the province hopes will lead to an avalanche of new revenue.

NATIONAL POST

* Unrepentant and unafraid of new controversy, Toronto Mayor Rob Ford used a series of YouTube videos Tuesday to declare "war" on nearly half of Toronto's city council and said he could see "no reason" for the city to fly the Pride flag during the Sochi Olympics.

* Yoga-wear retailer Lululemon Athletica Inc has apologized and revised its policy after some customers were banned from its online store after reselling products over the Internet.

FINANCIAL POST

* The explosion of transportation of oil by rail has gone a long way to alleviate pipeline bottlenecks, but Canadian Pacific Railway boss Hunter Harrison is not convinced it has been a boon for his own industry.

* As the newspaper industry considers the merits of cutting certain unprofitable print publication dates, the owner of Quebec's La Presse has struck a revised printing deal that gives it the option to publish less often.

China

SHANGHAI SECURITIES NEWS

- The PBOC drained 48 billion yuan through forward repurchase agreements for the first time in eight months on Tuesday, suggesting a tightening bias after a surge in liquidity following the Spring Festival, according to Liu Yihui, chief economist of Guangfa Securities.

- Wang Chuanfu, chairman of BYD Co Ltd, said demand for new energy cars will rise in 2014 thanks to supportive government policies, including subsidies and efforts to tackle air pollution.

CHINA SECURITIES JOURNAL

- China may soon issue banking licenses to three to five private companies ahead of the National People's Congress in early March, sources said. Policymakers have expressed support for the formation of privately-owned banks and sources said large and established companies are likely to get their licenses first.

21st CENTURY BUSINESS HERALD

- Deposits of the four major state-owned banks increased by 38 billion yuan ($6.26 billion) as of Feb. 16, regulations toward internet financial services to be expected.

- The Shanghai Free Trade zone will have more financial reforms rolled out before the National People's Congress in early March. Upcoming policies are expected to provide more flexibility in interest rates and reducing control over foreign exchange, said Jian Danian, vice-chairman of the zone administration. The government is also considering proposals to lower the tax rate for companies registered in the zone to 15 percent.

CHINA DAILY

- The China (Shanghai) Free Trade Pilot Zone launched cross-border yuan payment services on Tuesday under the guidance of the People's Bank of China. Five third-party payment service providers have received approval to handle renminbi-denominated cross-border payments in the zone, the PBOC's Shanghai office said.

PEOPLE'S DAILY

- Comprehensive reforms need to be conducted to achieve a better institutional system of socialism and to fulfill the demands of modern governing, and editorial said.

SHANGHAI DAILY

- More than 1200 people close to a realgar mine in Hunan Province have fallen victims to decades-long arsenic refining, with at least 500 mine workers dying from cancer, according to local authorities.

Britain

The Telegraph

SCOTLAND CAN ISSUE BONDS - BUT THEY WILL COST MORE

The Government has granted Scotland permission to issue its own bonds - but with a warning that it is "unlikely to be a cost effective form of borrowing".

COMPENSATE US IF YOU FREEZE THE CARBON TAX, SAYS POWER GIANT DRAX

Power giant Drax Group wants compensation if the Treasury freezes the carbon tax, arguing it would lose out on expected earnings from burning biomass.

The Guardian

BUY TO LET SPECIALIST PARAGON GETS BANKING LICENCE TO FINANCE CAR SALES

Solihull-based buy to let mortgage specialist Paragon has been given a banking licence as part of its drive to offer finance in Britain's booming car market.

MORE FERRARIS SOLD IN THE UK THAN ANYWHERE ELSE IN EUROPE

Despite rising prices in 2013 as Ferrari cut production, record numbers of the tailor-made vehicles were sold in Britain last year.

The Times

DOOSAN BABCOCK NUCLEAR DEAL TO CREATE 1,000 JOBS

Doosan Babcock has won a 1 billion pounds contract to extend the lives of EDF Energy's ageing nuclear reactors and help to keep the lights on in the UK.

FUND BOSSES TO LOOK AT INVESTOR CONCERNS OVER ESSAR PROPOSAL

The Association of British Insurers' investment committee is poised to discuss investor concerns about the contentious bid proposal for Essar Energy from its largest shareholder.

Sky News

RBS BOARD BEGINS PLANNING FOR HAMPTON EXIT

Directors of Royal Bank of Scotland have begun discussions about the appointment of a new chairman as Sir Philip Hampton prepares to step down from the taxpayer-backed lender.

'INSIDE MAN HELPED 1 MILLION POUND BARCLAYS BANK FRAUD'

Fraudsters stole more than 1 million pounds from a Barclays bank branch after fitting a remote control gadget to a worker's computer, a court has heard.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Producer Price Index for January at 8:30--consensus up 0.2%
Housing starts for January at 8:30--consensus rate 950K
Housing permits January at 8:30--consensus rate 975K

ANALYST RESEARCH

Upgrades

Actavis (ACT) upgraded to Buy from Neutral at Goldman
Ashford Hospitality (AHT) upgraded to Outperform from Neutral at RW Baird
CEMEX (CX) upgraded to Buy from Neutral at Sterne Agee
Capstone Turbine (CPST) upgraded to Outperform from Market Perform at FBR Capital
Genpact (G) upgraded to Buy from Neutral at Citigroup
Gogo (GOGO) upgraded to Overweight from Equal Weight at Evercore
J.B. Hunt (JBHT) upgraded to Buy from Hold at Wunderlich
M&T Bank (MTB) upgraded to Buy from Neutral at SunTrust
Saia, Inc. (SAIA) upgraded to Buy from Hold at Wunderlich

Downgrades

Atlas Pipeline Partners (APL) downgraded to Equal Weight from Overweight at Barclays
Calpine (CPN) downgraded to Neutral from Buy at UBS
Cape Bancorp (CBNJ) downgraded to Neutral from Buy at Sterne Agee
Con-way (CNW) downgraded to Hold from Buy at Wunderlich
Dresser-Rand (DRC) downgraded to Equal Weight from Overweight at Morgan Stanley
Dresser-Rand (DRC) downgraded to Market Perform from Outperform at Raymond James
Essex Property Trust (ESS) downgraded to Hold from Buy at Cantor
Knight Transportation (KNX) downgraded to Hold from Buy at Wunderlich
NPS Pharmaceuticals (NPSP) downgraded to Hold from Buy at Jefferies
Parkway Properties (PKY) downgraded to Market Perform from Outperform at BMO Capital
SM Energy (SM) downgraded to Hold from Buy at KeyBanc
SolarCity (SCTY) downgraded to Neutral from Outperform at RW Baird
Valspar (VAL) downgraded to Equal Weight from Overweight at First Analysis

Initiations

A.O. Smith (AOS) initiated with an Outperform at FBR Capital
American Eagle Energy (AMZG) initiated with a Buy at SunTrust
Canadian Solar (CSIQ) initiated with a Market Perform at FBR Capital
Dillard's (DDS) initiated with a Neutral at Citigroup
First Solar (FSLR) initiated with a Market Perform at FBR Capital
Genesco (GCO) initiated with a Sell at Goldman
Hannon Armstrong (HASI) initiated with an Outperform at FBR Capital
J.C. Penney (JCP) initiated with a Neutral at Citigroup
Johnson Controls (JCI) initiated with an Outperform at FBR Capital
Kohl's (KSS) initiated with a Neutral at Citigroup
Lennox (LII) initiated with an Outperform at FBR Capital
MSA (MSA) initiated with a Hold at Stifel
Macy's (M) initiated with a Buy at Citigroup
Nordstrom (JWN) initiated with a Neutral at Citigroup
Oshkosh (OSK) initiated with a Buy at Stifel
Polypore (PPO) initiated with a Market Perform at FBR Capital
Power Solutions (PSIX) initiated with an Outperform at FBR Capital
SunEdison (SUNE) initiated with an Outperform at FBR Capital
SunPower (SPWR) initiated with a Market Perform at FBR Capital
Tesla (TSLA) initiated with a Market Perform at FBR Capital
United Rentals (URI) initiated with a Buy at Stifel
Vocera (VCRA) initiated with a Buy at B. Riley
Westport Innovations (WPRT) initiated with an Outperform at FBR Capital

COMPANY NEWS

Canadian Natural (CNQ) acquired certain assets of Devon Canada (DVN) for $3.13B
Bombardier (BDRBF) signed contract with Transport for London valued at $2.1B
Chelsea Therapeutics' (CHTP) Northera was granted accelerated approval from the FDA for the treatment of symptomatic neurogenic orthostatic hypotension
Crossroads (CRDS) filed patent infringement suits against Cisco (CSCO), NetApp (NTAP), Quantum (QTM)
Verizon (VZ) expects to issue 1.27B common shares to Vodafone (VOD) shareholders as part of its acquisition of Vodafone's 45% stake in Verizon Wireless
Mattress Firm (MFRM) said it expects Q4 profit and sales to come in below expectations
Analog Devices (ADI) approved increase to share repurchase program to $1B
Energy Transfer Partners (ETP) announced long term agreement with XTO Energy (XTO, XOM)

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Terex (TEX), Oceaneering (OII), Neenah Paper (NP), CF Industries (CF), NPS Pharmaceuticals (NPSP), Panera Bread (PNRA), Herbalife (HLF), Potbelly (PBPB), Flowserve (FLS), Fluor (FLR), Nabors Industries (NBR), Columbia Sportswear (COLM)

Companies that missed consensus earnings expectations include:
NorthWestern (NWE), FreightCar America (RAIL), Yamana Gold (AUY), Phototronics (PLAB), InnerWorkings (INWK), La-Z-Boy (LZB), Greenlight Capital Re (GLRE), DryShips (DRYS), Sykes Enterprises (SYKE)

NEWSPAPERS/WEBSITES

GE (GE) sued IRS to recover $658M in taxes and interest, WSJ reports
China investigating Qualcomm (QCOM), InterDigital (IDCC) over monopoly concerns, WSJ reports
John Malone (DISCA, LBTYA) starts succession planning, FT reports
BlackBerry (BBRY) CEO blasts T-Mobile (TMUS) for pushing change to iPhones (AAPL), Bloomberg reports
AIG (AIG) accused of holding BofA (BAC) $8.5B settlement 'hostage,' Reuters reports
Novartis (NVS) Tokyo unit raided by prosecutors, Reuters reports
Target (TGT) CEO Steinhafel faces cybertheft aftermath, WSJ reports
Prosecutors alleged GPB1.25M stolen from Barclays (BCS) in one day, FT reports
Actavis (ACT) expected to seek more deals, WSJ reports
General Mills (GIS) seeks deals in fast growing emerging markets, Reuters reports

SYNDICATE

Advaxis (ADXS) to sell up to $50M in common stock
Arrowhead Research (ARWR) files to sell common stock
Five Oaks (OAKS) files to sell 3M in common stock
Kinder Morgan Energy (KMP) files to sell 6.9M common units
MarkWest Energy (MWE) files to sell $1.2B of common units representing limited partner
Verizon (VZ) to issue 1.27B common shares to Vodafone

• Putin playing the long game over Russian kin in Ukraine (Reuters)
• U.S.-Russia Relations Come Full Circle After Ukraine (WSJ)
• Japan PM makes offering to Yasukuni Shrine, angers China, South Korea (Reuters)
• In Gold Miners' Talks, Scale Is Crucial: Combined Barrick-Newmont Would Be Able to Trim Costs (WSJ)
• SEC Said to Weigh Shining Light on Brokers’ Stock Routing (BBG)... and protmply unweigh it
• Exelon Beating Facebook in S&P 500 After Valuation Scare (BBG)
• Court Case May Help Define 'Insider Trading' (WSJ)
• Spanish banks face tough rivalry in small companies bet (Reuters)
• TPG-Led Group Closes $450 Million Investment in Airbnb (WSJ)
• Friends, and Influence, for Sale Online (NYT)
• Pfizer Said to Have Held Now-Dormant Talks to Buy AstraZeneca (BBG)
• Apple, Google Vie to Offer Exclusive Game Apps  (WSJ)
• PS4 outsold Xbox One in March while Titanfall led software sales (CNET)

Overnight Media Digest

WSJ

* Some of tech's biggest names - Steve Jobs, Eric Schmidt, Sergey Brin, Bill Campbell - conferred and squabbled and made peace privately for years, documents in a current Silicon Valley antitrust case reveal. But they were unable to pull a new company into the club, the court documents show: Facebook declined their friend request. (http://r.reuters.com/jym68v)

* Federal officials are considering spending more than $1 billion of the remaining $3.6 billion of rebuilding aid on disasters other than superstorm Sandy, money that New York and New Jersey are banking on to finish repairs to thousands of homes and complete major infrastructure projects. (http://r.reuters.com/can68v)

* Richard Branson made headlines in 2010 when he boasted that Virgin Hotels, his new boutique hospitality brand, would shake up the industry. The first property was projected to open within 18 months, with up to two dozen more operating within seven years. Nearly four years after Branson's boast, Virgin Hotels still has not opened a single property, and has had to deal with the departure of two top executives. (http://r.reuters.com/nan68v)

* Business economists' outlook for near-term hiring strengthened this spring to the highest mark in nearly three years, a new survey found. The poll by the National Association for Business Economics said 43 percent of corporate economists expect hiring within their firm or industry to increase during the next six months. (http://r.reuters.com/gan68v)

* A case pending before a federal appeals court could help define a financial crime that has been in the spotlight for the past few years. At issue in the appeal is whether, to be considered to have traded on confidential material information, a trader must have known the tip had been illegally disclosed in exchange for a reward. (http://r.reuters.com/jan68v)

* A long-running battle between Apple Inc and Google Inc for mobile dominance is spreading to the most lucrative genre of apps: videogames. The two Silicon Valley giants have been wooing game developers to ensure that top-tier game titles arrive first on devices powered by their respective operating systems, people familiar with the situation said. (http://r.reuters.com/dym68v)

* With 10 days left in April, General Motors Co needs a strong finish in new-car and pickup-truck sales for the month to persuade Wall Street its recall problems are not keeping customers away from showrooms. (http://r.reuters.com/qan68v)

* Samsung Electronics Co overtook Apple Inc to become the world's biggest smartphone maker by selling hardware using Google Inc's popular Android operating system. As it tries to beef up in software, the South Korean tech giant has been hiring more engineers to develop its own platform and applications for mobile devices, wearables and other consumer electronics. (http://r.reuters.com/wym68v)

* Pomegranate-juice maker POM Wonderful LLC, owned by Los Angeles billionaires Lynda and Stewart Resnick, heads to the Supreme Court on Monday, seeking to revive a lawsuit accusing Coca-Cola Co of misleading consumers about the contents of a rival fruit beverage. Next week, POM is scheduled to appear in federal appeals court, where it is battling Federal Trade Commission findings that the company engaged in product deception of its own. (http://r.reuters.com/fym68v)

* Commercial real estate data firm CoStar Group Inc has forced a small competitor, New York startup CompStak Inc, to give up the names of four CompStak users who CoStar alleges violated its licensing agreement. CompStak turned over the names Friday under a ruling by U.S. District Judge Alvin Hellerstein in Manhattan. CoStar alleges the individuals infringed its copyrights by providing CompStak with CoStar data. (http://r.reuters.com/qym68v)

* BlackRock Inc, T. Rowe Price Group Inc and Fidelity Investments are among the mutual-fund firms pushing into Silicon Valley at a record pace, snapping up stakes in high-profile startup companies including Airbnb Inc, Dropbox Inc and Pinterest Inc. (http://r.reuters.com/hym68v)

NYT

* After years of legal skirmishes, four leading Silicon Valley companies are scheduled to go on trial next month on claims of conspiring to keep their employees down. (http://r.reuters.com/ban68v)

* The Californian city of San Bernardino, which had stopped making its required pension contributions in 2012, is in another fight with Calpers over skyrocketing pension costs that could embolden other municipalities seeking relief from crippling payments to the nation's largest public pension system. (http://r.reuters.com/kan68v)

* The Volcker Rule does not go into effect until 2015, but that hasn't stopped United States' big bankers and their supporters in Washington from trying to undermine it. The latest fight involves another complex Wall Street creation, a financial instrument known as a collateralized loan obligation. Big banks want to be allowed to own them but regulators say such holdings can be hazardous and may allow the banks to evade the Volcker Rule's prohibition on risky trading. (http://r.reuters.com/den68v)

* Many visitors at the New York International Auto Show have not lost their confidence in General Motors Co despite the company's long-delayed recall of millions of small cars for an ignition switch defect that General Motors has linked to 13 deaths and 31 accidents and has led to federal investigations, contentious hearings in Congress and mounting criticism from lawmakers and consumer advocates. (http://r.reuters.com/gen68v)

* Dmytro Firtash, a Ukrainian businessman who made billions brokering gas deals, now faces both a criminal indictment and a racketeering lawsuit in United States courts as middlemen like him have come under increased scrutiny for their business and political activities in the months after the Ukranian revolution. (http://r.reuters.com/ken68v)

Canada

THE GLOBE AND MAIL

* A Toronto-area teenager who alleges repeated homophobic discrimination at his Catholic high school feels he is "winning" now that a rights tribunal is looking into his complaints. (r.reuters.com/cyn68v)

* Authorities in British Columbia are anxious to bring a Netherlands resident to a Canadian courtroom on cyberbullying charges in a teen suicide case, but legal experts say it's unclear when or even if they might get the chance. (r.reuters.com/byn68v)

Reports in the business section:

* Barrick Gold Corp and Newmont Mining Corp , the world's two largest gold producers, are still open to merger discussions and could rekindle talks ahead of Barrick's annual shareholder meeting on April 30 after negotiations hit a snag late last week and the companies decided to take a break. (r.reuters.com/gyn68v)

NATIONAL POST

* With more than half its ships and submarines being repaired, modernized or in a reduced state of readiness, the Royal Canadian Navy is acknowledging that it has hit the low point in availability of its vessels. (r.reuters.com/kyn68v)

* With Toronto city councillor Adam Vaughan emerging as a star candidate for the Liberal party in an upcoming by-election, the local riding association is stressing that the high-profile announcement was not yet a "coronation" for Vaughan. (r.reuters.com/hyn68v)

FINANCIAL POST

* The Canadian government demanded an answer immediately on the long-delayed Keystone XL pipeline. It has now received a reply from the United States government that amounts to: Maybe next year. The project is now paralyzed for an indefinite period, with the U.S. administration on Friday announcing another delay in a process already beset by political and legal challenges. (r.reuters.com/xyn68v)

China

PEOPLE'S DAILY

- China will remain self-sufficient in its main food crops, including wheat and rice, in the coming decade, according to a report by the Chinese Academy of Agricultural Sciences.

SHANGHAI SECURITIES NEWS

- China is set to resume reviewing new applicants of stock initial public offering (IPOs) after an 18-month suspension. A total of 606 companies are now on a waiting list to launch IPOs.

- Officials and economists participating in an industrial forum over the weekend warned that China should not try a "big leap forward" in its latest urbanisation drive.

CHINA SECURITIES JOURNAL

- China's Xinjiang hopes to make itself into a new strategic energy base for the country, according to a plan by the regional government to expand the local economy.

- Top Chinese insurer China Life Insurance Co has opened tenders to hire managers for stock investments of its assets worth of 20 billion yuan ($3.2 billion).

CHINA DAILY

- China's catering industry registered its slowest growth in 20 years in 2013 as the official anti-corruption campaign targeting official excess took its toll on high-end business, a report by the China Cuisine Association showed.

SHANGHAI DAILY

- More than 1,000 police officers now carry guns when on routine patrol in Shanghai as part of a national security campaign in the wake of the fatal knife attack in the southwestern Chinese city of Kunming last month.

Britain

The Sunday Times

OIL EXPLORER LOOKING TO LIST IN OSLO

Oil explorer African Petroleum, founded by Frank Timis, is planning to float on the Oslo stock exchange after the natural resources entrepreneur was barred from listing the company in the UK four years ago. The company is listed in Australia where it stock price has gyrated wildly.

TOP SALARY TO LURE NORTH SEA REGULATOR CHIEF

The head of the UK's new regulator for the North Sea is set to be one of the best-paid public servants in Britain.

The new regulator, created after a government review into Britain's offshore oil sector last month, is searching for candidates to lead the body which is tasked with maximising recovery of North Sea oil and gas reserves.

The Department of Energy and Climate Change hopes to have someone in place by July.

TYCOON EYES REFINERY RESCUE

American financier Gary Klesch could mount a last-ditch bid to save Murco's Milford Haven oil refinery. Klesch is among a handful of investors interested in the refinery which Murphy Oil , Murco's American parent, has been looking to sell for three years.

PHLEXGLOBAL SEEKS 50 MLN STG SALE

Phlexglobal, which helps bigger drug companies to run trials for new medicines, is being groomed for sale by its private equity backer Inflexion, with price target of around 50 million pounds. The company could be sold to a bigger drug services company or a rival private equity investor.

TESCO'S BLINKBOX LOSES 30 MLN STG

Tesco's online video service Blinkbox has lost tens of millions of pounds since Tesco bought it three years ago. The subsidiary lost 18.5 million pounds last year, 5.7 million pounds in 2012 and an insider told Sunday Times these losses had deepened to 30 million pounds this year.

RBS PUTS TROUBLESHOOTER IN CHARGE OF ITS CO-OP LOANS

Royal Bank of Scotland has put Bob Hedger, one of its top corporate troubleshooters, in charge of its loans to Britain's troubled Co-Operative Group.

The Sunday Telegraph

FRACKING TO DELIVER BILLIONS TO UK SUPPLY CHAIN

Britain's shale gas and oil industry could create tens of billions of pounds for the UK supply chain, according to a report by UK Onshore Operators to be published this week.

Report will highlight how specific sectors, such as manufacturers of steel for fracking equipment, could benefit.

RBS MULLS LEGAL ACTION OVER REPORT

Royal Bank of Scotland is considering suing Lawrence Tomlinson for libel after he alleged the lender of deliberately putting customers out of business for profit.

RSA TO CUT HUNDREDS OF MILLIONS OF POUNDS FROM COSTS

New chief executive of RSA Insurance Group, Stephen Hester, will attempt to cut hundreds of millions of pounds of costs as the insurer moves into the next stage of its rehabilitation, although no specific savings target has been set.

VODAFONE SUED FOR 1.1 BLN STG BY FORMER GREEK PARTNER

Greek businessman Athanasios Papistas is claiming 1.1 billion pounds in damages from Vodafone after the British telecoms company pulled out of a retail franchise deal with the businessman. The case is not due to be heard before Greek courts until 2016. Vodafone denies the allegations.

CITY WATCHDOG READY TO TIGHTEN RULES TO PROTECT MINORITY SHAREHOLDERS

The Financial Conduct Authority will next month look at changing the listing rules so that a majority investor will have to get support from a large number of smaller shareholders to take a company private

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Chicago Fed national activity index for March at 8:30--consensus 0.2
Leading indicators for March at 10:00--consensus up 0.7%

ANALYST RESEARCH

Upgrades

Aimco (AIV) upgraded to Equalweight from Underweight at Barclays
Arch Coal (ACI) upgraded to Neutral from Sell at Goldman
Armstrong World (AWI) upgraded to Buy from Hold at KeyBanc
athenahealth (ATHN) upgraded to Hold from Underperform at Jefferies
Aviv REIT (AVIV) upgraded to Buy from Neutral at Goldman
Badger Meter (BMI) upgraded to Outperform from Neutral at RW Baird
Big Lots (BIG) upgraded to Overweight from Neutral at Piper Jaffray
Boardwalk Pipeline (BWP) upgraded to Outperform from Sector Perform at RBC Capital
Boston Properties (BXP) upgraded to Outperform from Market Perform at Cowen
Chipotle (CMG) upgraded to Overweight from Neutral at JPMorgan
CoStar Group (CSGP) upgraded to Buy from Neutral at B. Riley
Cornerstone OnDemand (CSOD) upgraded to Buy from Neutral at UBS
Dynegy (DYN) upgraded to Buy from Neutral at UBS
HNI Corporation (HNI) upgraded to Outperform from Market Perform at Raymond James
Home Bancshares (HOMB) upgraded to Outperform from Market Perform at Raymond James
Hub Group (HUBG) upgraded to Buy from Neutral at Longbow
Morgan Stanley (MS) upgraded to Buy from Neutral at Nomura
Plexus (PLXS) upgraded to Buy from Hold at Cross Research
Plexus (PLXS) upgraded to Buy from Hold at Needham
Simmons First National (SFNC) upgraded to Outperform at Keefe Bruyette
Time Warner Cable (TWC) upgraded to Buy from Hold at Brean Capital
United Microelectronics (UMC) upgraded to Neutral from Sell at Goldman
Watts Water (WTS) upgraded to Outperform from Perform at Oppenheimer
Zimmer (ZMH) upgraded to Buy from Hold at Cantor

Downgrades

American Electric (AEP) downgraded to Neutral from Buy at ISI Group
BB&T (BBT) downgraded to Perform from Outperform at Oppenheimer
Dover (DOV) downgraded to Hold from Buy at Stifel
Jabil Circuit (JBL) downgraded to Sector Perform from Outperform at RBC Capital
Mack-Cali Realty (CLI) downgraded to Market Perform from Outperform at Cowen
MoneyGram (MGI) downgraded to Market Perform from Outperform at JMP Securities
PDC Energy (PDCE) downgraded to Market Perform from Outperform at BMO Capital
Pacific Coast Oil (ROYT) downgraded to Neutral from Buy at Janney Capital
TransCanada (TRP) downgraded to Sector Performer from Outperformer at CIBC
Walter Energy (WLT) downgraded to Sell from Neutral at Goldman
Yum! Brands (YUM) downgraded to Neutral from Overweight at JPMorgan

Initiations

Applied Genetic (AGTC) initiated with a Buy at Cantor
Applied Genetic (AGTC) initiated with an Outperform at BMO Capital
Navient (NAVIV) initiated with a Buy at Goldman
Pacira Pharmaceuticals (PCRX) initiated with a Buy at BofA/Merrill
Puma Biotechnology (PBYI) initiated with a Buy at Citigroup
Sallie Mae Bank (SLMVV) initiated with a Neutral at Goldman
Square 1 Financial (SQBK) initiated with a Market Perform at Keefe Bruyette

COMPANY NEWS

Supreme Court denied Teva (TEVA) stay in generic Copaxone case
Beam (BEAM) said CFO Robert Probst resigning ahead of Suntory acquisition
State Department extended deadline for Keystone Pipeline Project (TRP)
Perfect World (PWRD) entered into agreements to acquire shares in Shanda Games (GAME)
Abaxis (ABAX) announced court approval of shareholders lawsuit settlement
Omega Healthcare (OHI) raised quarterly dividend to 50c from 49c

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Hasbro (HAS), SunTrust (STI)

Companies that missed consensus earnings expectations include:
Old Line Bancshares (OLBK)

NEWSPAPERS/WEBSITES

Twitter (TWTR), Netflix (NFLX), Amazon (AMZN) look pricey, Barron's says
Home Depot (HD) could rally 25%, Barron's says
Meridian Bioscience (VIVO) could return 20%, Barron's reports
Revlon (REV) still looks cheap, Barron's says
Sarepta (SRPT) shares could double, Barron's reports
Raytheon (RTN) could have 20%-30% upside, Barron's says
Pfizer (PFE) said to be considering GBP60B bid for AstraZeneca (AZN), Sunday Times says
Nike (NKE) to pull out of wearable-hardware market, CNet says
Court documents say Silicon Valley giants (AAPL, GOOG, INTC, ADBE) discussed hiring, WSJ says
General Motors (GM) sees minimal impact on U.S. sales from recall, WSJ reports
GM (GM) waited years to recall 335,000 Saturn Ions despite complaints, AP reports
Barrick Gold (ABX), Newmont Mining (NEM) merger talks said to be called off, WSJ says
Ahead of TWC (TWC), deal Comcast (CMCSA) in talks to sell subscribers to Charter (CHTR), Reuters says
Musk says Tesla (TSLA) to produce vehicles in China within 3-4 years, Bloomberg says

SYNDICATE

New York REIT (NYRT) files automatic mixed securities shelf
Umpqua Holdings (UMPQ) files to sell 43.3M shares, 4.95M warrants for holders

• China’s Biggest Banks Are Squeezed for Capital (NYT)
• Greeks detect hypocrisy as Dutch coalition stumbles (Reuters)
• Hollande Blames Europe’s Austerity Plan for Le Pen’s Rise (Bloomberg)
• In a Change, Mexico Reins In Its Oil Monopoly (NYT)
• China Tire Demand Slows as Economy Decelerates, Bridgestone Says (Bloomberg)
• Social Security’s financial forecast gets darker; Medicare’s outlook unchanged (WaPo)
• Fed’s 17 Rate Forecasts May Confuse More Than Clarify (Bloomberg)
• Senate to vote on array of Postal Service overhaul proposals (WaPo)
• Weidmann Says Bundesbank Is Preserving Euro Stability (Bloomberg)
• Hungary Pledges Cuts Aimed at EU Demands (WSJ)
• Immigration from Mexico to US at standstill (FT)
• Orbán stands firm in central bank dispute (FT)

Overnight Media Digest via Reuters

WSJ

* In what is likely to be the last snapshot of its financial condition before an expected May IPO, Facebook disclosed that its first-quarter profit and revenue declined from the final quarter of 2011.

* Government trustees are projecting Social Security will exhaust its trust fund three years sooner than previously thought.

* New York law firm Dewey & LeBoeuf is more deeply in debt than previously thought. It owes about $75 million to a syndicate of bank lenders.

* Unilever is negotiating to build a $100 million palm-oil processing plant in Indonesia, an attempt to accelerate its commitment to sourcing the oil in ways that don't destroy the environment.

* Planetary Resources will outline a plan to send an unmanned spacecraft to an asteroid and mine it for valuable metals and water that could be used in further space exploration or returned to earth.

* The union representing American Airlines' mechanics agreed to send the airline's latest contract proposal to members for a vote.

* A U.S. trade panel Monday voted against imposing retaliatory duties on galvanized steel wire from China and Mexico, determining that U.S. producers aren't being hurt by the rise in imports.

* Spain's economy contracted 0.4 percent in the first quarter from the fourth, the country's central bank said Monday, the latest evidence that Spain's efforts to rein in government spending could be feeding a downward economic spiral.

FT

MEXICO BRIBERY CLAIMS HIT WALMART SHARES

Walmart shares tumbled nearly 5 percent and shares in its Mexican business dropped even further as allegations of bribery and a cover-up shook the U.S. retailer.

FACEBOOK GROWTH SLOWS AHEAD OF IPO

Facebook's revenue and profit growth are slowing, marking a turning point for the high-growth social networking company just weeks before its initial public offering.

CABLE AND WIRELESS NAME TO DISAPPEAR IN UK

The Cable & Wireless name is set to disappear from the UK telecoms market after almost 80 years following Vodafone's agreement of a 1 billion pound ($1.61 billion) cash acquisition of the group.

INVESTORS LAUNCH DEUTSCHE BANK PROTEST

Deutsche Bank's non-executive board is facing a protest from an influential activist investor over its pay policies and turbulent succession planning in another sign of how global investors are challenging bank directors.

COBHAM HIRES AMERICAN CHIEF

Cobham, the UK defence and aerospace group, has completed its five-month-long search for a chief executive by hiring Robert Murphy from the U.S. subsidiary of BAE Systems .

EX-CALPERS CHIEF ACCUSED OF FRAUD

The former head of the California Public Employees' Retirement System, the largest U.S. pension fund, has been slapped with civil charges accusing him of defrauding Apollo Global, the private equity group.

VENTURE CAPITAL FIRM DEFENDS INSTAGRAM HOLDING

Andreessen Horowitz has been forced to defend its early stake in Instagram, the photo-sharing app acquired by Facebook this month for about $1 billion, despite the venture capital firm receiving a more than 300-fold return in two years.

VOLVO TO EXPAND OFFERING IN CHINA

Volvo Cars will launch 10 models in China over the next five years as it seeks to make up for lost time in the world's largest car market, its chief executive said.

NYT

* A commission of energy specialists formed by Mexico's Congress has begun to question where and how Pemex, Mexico's state-owned oil monopoly, drills for oil.

* Wal-Mart's stock slipped as investors reacted to a bribery scandal at the retailer's Mexican subsidiary and a report that an internal investigation was quashed at corporate headquarters.

* MetLife on Monday became the third big life insurer to settle regulatory accusations of failing to keep track of policyholder deaths, trapping money that should have gone promptly to the beneficiaries.

* A euro zone strategy to cut deficits has come under increasing strain from slowing economies, gyrating financial markets and electoral setbacks.

* Mainland Chinese banks are turning to markets to raise funds, even as they report strong profits and say their balance sheets are solid.

Canada

THE GLOBE AND MAIL

- Less than a year after he asked Canadian voters to make him prime minister, ex-Liberal leader and academic Michael Ignatieff warned that the country is drifting towards a breakup.

r.reuters.com/jav77s

- One of Canada's leading polling firms says it has found strong evidence of a targeted program of voter suppression aimed at non-Conservative voters during last May's federal-election campaign.

r.reuters.com/nav77s

Reports in the business section:

- Swapping out engines is costly, but natural gas has grown so much cheaper than diesel that, according to a new analysis conducted by the Conference Board of Canada, a long-distance trucker could save nearly $160,000 over a decade by making the change.

r.reuters.com/tav77s

- Shoppers Drug Mart Corp has been hit with yet another round of Ontario cuts in generic prescription drug prices while still grappling with earlier profit-pinching drug reforms.

r.reuters.com/cev77s

NATIONAL POST

- Defying the odds of pollsters and naysayers, Alberta's long-ruling Progressive Conservatives won their 12th straight majority government Monday night.

r.reuters.com/dev77s

Reports in the business section:

- Ontario's minority Liberal government is set to survive a budget vote after Premier Dalton McGuinty said he will introduce a 2 percent tax on people with incomes greater than $500,000, meeting a key demand from the New Democrat Party.

r.reuters.com/kev77s

- Three weeks after Baja Mining Corp narrowly won a proxy fight with its largest shareholder, the company revealed on Monday that three directors have resigned and that it is facing a big funding shortfall at its flagship copper project.

r.reuters.com/hev77s

European economic highlights:

• Finland PPI for March 0.40% m/m 1.4% y/y – lower than expected. Consensus 0.80% m/m 1.80% y/y. Previous 1.20% m/m 2.20% y/y.
• Finland Unemployment Rate for March 8.50% - higher than expected. Consensus 8.20%. Previous 7.70%.
• Switzerland Trade Balance for March 1.69B – lower than expected. Consensus 3.00B. Previous 2.68B. Revised 2.61B.
• Switzerland Exports real s.a. for March -2.50% m/m – lower than expected. Consensus 1.00%. Previous 9.20%. Revised 12.00%.
• Switzerland Imports real s.a. for March 4.60% m/m. Previous -12.30% m/m. Revised -12.20% m/m.
• Switzerland UBS Consumption Indicator for March 1.22. Previous 0.87. Revised 0.9.
• Sweden Unemployment Rate for March 7.70% - lower than expected. Consensus 8.00%. Previous 7.80%.
• France Consumer Confidence Indicator for April 88 – higher than expected. Consensus 87. Previous 87.
• France Business Survey Overall Demand for April 3 – higher than expected. Previous -12. Revised -8.
• Spain Mortgages-capital loaned for February -49.60% y/y. Previous -34.00% y/y.
• Spain Mortgages on Houses for February -47.10% y/y. Previous -41.30% y/y.
• Italy Hourly Wages for March 1.20% y/y. Previous 1.40% y/y.
• UK Public Finances (PSNCR) for March 16.5B – higher than expected. Consensus 13.0B. Previous -7.8B. Revised -8.2B.
• UK PSNB ex Interventions for March 18.2B – higher than expected. Consensus 16.0B. Previous 15.2B. Revised 12.2B.
• UK Public Sector Net Borrowing for March 15.9B – higher than expected. Consensus 14.2B. Previous 12.9B. Revised 9.9B

• Hilsenrath Humor du jour: Bernanke Advocates Stronger Currencies (WSJ)
• Auditors want two more years for Greece on deficit (Spiegel)
• More bluster: Schaeuble Rules Out Greek Default as Samaras, Troika Bargain (Bloomberg)
• And even more bluster: De Jager Says Greece Needs to Make Fiscal Reforms Immediately (Bloomberg)
• Global Economy Distress 3.0 Looms as Emerging Markets Falter (Bloomberg)
• Central bank governor stresses inflation control (China Daily)
• Greek Yields Reach Post Debt-Swap Low as Bunds Slip on Schaeuble (Bloomberg)
• Roth and Shapely win Nobel prize for economics (Reuters)
• Fed chief rounds on stimulus critics (FT)
• IMF Board Sees Biggest Power Shift Reshuffle in Two Decades (Bloomberg)
• EU Girds for Summit as Nobel’s Glow Fades on Crisis Response (Bloomberg)
• Japan security environment tougher than ever (Reuters)
• Banks Temper Job Cutting After Surge in 2011 Reductions (Bloomberg)

Overnight Market Digest

WSJ

* Japanese company Softbank Corp is close to a $20 billion deal to buy a majority stake in Sprint Nextel Corp , people familiar with the matter said.

* The collapse of Royal Bank of Scotland Group Plc's plan to sell 316 UK branches to Banco Santander SA forces both banking heavyweights to scramble for alternatives and threatens to complicate their efforts to weather Europe's financial crisis.

* Google Inc's market capitalization recently pulled even with Microsoft Corp for the first time, fueled by good news about Google's online-ad business and missteps from its top competitors.

* Private equity-owned French cable operator Numericable is among the latest to float an offer, proposing to merge with Vivendi SA's French telecommunications arm SFR, people familiar with the proposal said.

* Caxton Associates LP plans to lower the fees it charges clients of its $7.5 billion hedge fund, a sign that even veteran money managers are bowing to investor pressure amid lackluster returns and low interest rates.

* U.S. crude production is expected to rise 12 percent this year and 8 percent in 2013, when it will hit the highest level since 1993, according to government figures.

* A settlement to pay off some of the debt of failed law firm Dewey & LeBoeuf LLP gave hundreds of former partners an escape hatch from ugly litigation. The $71.5 million agreement between Dewey's estate and more than 400 former partners provides the biggest chunk recovered so far for creditors.

* ZTE Corp forecast it would lose between 1.9 billion yuan ($303.17 million) and 2 billion yuan in the third quarter, illustrating the challenges facing China's biggest telecommunications-equipment makers.

NYT

* Sprint Nextel Corp is putting the final touches on a deal to sell 70 percent of itself to SoftBank Corp of Japan for $20 billion, according to people briefed on the matter, in the struggling cellphone service provider's boldest move yet to revive its fortunes.

* Microsoft Corp plans to announce On Monday a service called Xbox Music that will offer access to a global catalog of about 30 million songs.

* The American Civil Liberties Union is accusing Morgan Stanley of fueling the production of risky, expensive loans that targeted African-American borrowers.

* The very loans that are supposed to help seniors stay in their homes are in many cases pushing them out. Now, as the vast baby boomer generation heads for retirement, the newly minted Consumer Financial Protection Bureau is working on new rules that could mean better disclosure for consumers and stricter supervision of lenders.

Canada

THE GLOBE AND MAIL

* Canada's second-largest meat processing plant will resume partial operations Tuesday after a bizarre weekend standoff that saw XL Foods lay off its entire work force on Saturday, and then recall more than a third of them the next day.

* As Premier Pauline Marois starts her three-day official visit to Paris by meeting French President François Hollande, the Parti Québécois Leader hopes France will revert to its long-standing diplomatic position toward Quebec.

Reports in the business section:

* Housing markets across Canada - with the exception of Calgary - are continuing to soften, even as the fall sales season kicks off. Figures to be released Monday by the Canadian Real Estate Association are expected to show falling sales in most major cities in September, with Vancouver leading the decline. September's decrease in sales comes on the heels of a 5.8 percent monthly drop from July to August.

* Canada's economy is struggling, but the manufacturing sector is expected to show some growth when the factory shipment figures for August are released Tuesday. Still, most of the improvement - if it happens - may be because of increased car production and petroleum exports, rather than any significant broad-based recovery among manufacturers.

NATIONAL POST

* Former Bank of Canada governor John Crow reflects on the legacy of fellow former governor James Elliott Coyne, who passed away Friday at the age of 102.

FINANCIAL POST

* Canada has been so stuck on the idea that energy development depends on boosting exports to the United States and Asia that the obvious other option, increasing domestic use, has been getting less attention than it deserves. That option will be thrust to the top of the national agenda if TransCanada Corp moves ahead with plans to convert parts of its underutilized Canadian Mainline system from gas to oil transportation, which could be ready for takeoff by the end of the year.

* A trading halt and regulatory investigation into a Canadian junior miner has raised questions about the company's ownership structure and cast a cloud over its board members, which include some high-profile Canadian businessmen. When the U.S. Securities and Exchange Commission halted Liberty Silver Corp on Oct. 5, it had "questions concerning publicly available information about Liberty Silver, the control of its stock, its market price, and trading in the stock."

Australia

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

Corporate governance experts CGI Glass Lewis and the Australian Shareholder Association have called on investors to reject nearly A$1 million worth of options to Chris Roberts, chief executive of Cochlear, after his biotechnology group spent A$101.3 million in recalling bionic implants. "The performance hurdles for awards are not challenging at all, with the likelihood of vesting a near certainty," Aaron Bertinetti, director of CGI Glass Lewis, said. Page 13.
--

OzForex, a technology firm supported by investment house Macquarie Group, has secured a contract with foreign exchange group Travelex to launch an online payments transfer offering. Neil Helm, chief executive of OzForex, said the arrangement would "be from a global perspective our biggest success story". The service, which will allow Travelex clients to transfer funds across accounts internationally, will be launched in Britain before being made available in Canada, Singapore, Hong Kong, New Zealand, the United States and Australia over the next twelve months. Page 13.
--

Bill Morrow, chief executive of Vodafone Hutchison Australia , yesterday said the mobile phone network operator would not launch an ambitious bid for "digital dividend" spectrum, with the embattled company concentrating on restoring its reputation and rebuilding its service. "We will participate [in the auction], but we are not going to be putting forward any large amounts of money," Mr Morrow said. Vodafone currently has the most amount of spectrum in the 1800MHz frequency band, which is developing into a standard for 4G next generation services, out of the major Australian carriers. Page 13.
--

Cheryl Cartwright, chief executive of the Australian Pipeline Industry Association, yesterday said the day before the lobby group's annual conference that natural gas needed to be supplied at an affordable price for local clients to prevent the sector from contracting. "We don't want to have the price so high that the companies which are complaining now about the price of gas go out of business, because in another five to 10 years the prices could come right down and we don't want to lose these companies in the meantime," she said. Page 15.
--

THE AUSTRALIAN (www.theaustralian.com.au)

Russell Tate, chairman of Macquarie Radio Network, which recently pulled advertising from the show hosted Alan Jones following an online backlash against the shock jock, warned that company boards "are not at all well prepared" to handle social media. "The issue for boards is that social media is relatively new and a relatively young person's thing, while directorships are for experienced people," Julie Garland McLellan, an adviser and company director, said. Page 19.
--

Justin Arter, the new head of global asset manager BlackRock's Australian operations, forecast widespread consolidation of local industry super funds and warned that fund managers who kept poorly performing equity strategies would be vulnerable. "We've withdrawn from some areas of the market  We've certainly seen a few boutique suppliers withdraw over the past three or four months. Fund managers have to move with what their clients want," Mr Arter stated. Page 19.
--

James Suckling, a wine critic with the United States (US) industry publication Wine Spectator for three decades, called on Australian winemakers to increase their efforts to export overseas to improve their overall reputation. "Last year when I came to Australia I told a big US retailer I was going down under, and he said, 'Why? We can't sell the stuff.' - It says to me winemakers need to spend more time in the US and exports market, everything from consumers to sommeliers to wine buyers - and that's something the French do really well," he added. Page 19.
--

Tony Crawford, chairman of accounting firm Grant Thornton, remarked that "it's time for the mid-size enterprises to have a greater voice" about doing business in Asia, saying the majority of the debate about doing business in the region had been controlled by major corporations, bankers and large miners. "If the next wave of Australian engagement with Asia is to be led by these dynamic organisations which drive so much of the growth in our domestic economy, then they must develop a more 'Asia capable' workforce," he added. Page 20.
--

THE SYDNEY MORNING HERALD (www.smh.com.au)

Elmer Funke Kupper, chief executive of the Australian Securities Exchange, has been in talks with Federal Treasurer Wayne Swan over concerns surrounding high-frequency trading. "I'd like to think that in the next 12 months we could take this off the front page of the paper because I don't think its that hard [to solve]  [the Australian Securities and Investments Commission] is very engaged on it," Mr Funke Kupper said. The corporate regulator is reviewing possible changes to the rules covering the Australian sharemarket. Page B1.
--

Virgin Australia has quietly launched a number of The Club lounges at airports across Australia, with observers noting the lack of marketing surrounding the venues. The private location is designed to be Qantas's counter to the Chairman's Lounge offering from Qantas Airways, a small invite-only getaway in airports across Australia for lucrative government and business passengers. The Club offers a la carte menus, luxury facilities, escorts to take members to terminal gates and a personalised service. Page B1.
--

Financiers behind free-to-air television group Nine Entertainment Co will decide the future of the company at a meeting tomorrow, with Nine's management making one last bid to get lenders to accept a restructure of its debt that would result in the latter receiving control of the group. Nine has threatened to go into voluntary administration unless it receives an agreement from its financiers by tomorrow. Second-ranked mezzanine lenders have approved the deal, which gives them A$150 million in Nine, but the higher-ranked senior lenders are yet to approve. Page B3.
--

Andrew Smith, head of Invocare, Australia's largest cremation, burials and funerals provider, yesterday said that funeral insurance plans were unnecessary and insurers were "misleading" clients about the possibility of being forced to pay for a funeral. "Most people don't appreciate that if you are executor of a will, you can provide evidence of the funeral directors' fees and that is the one expense that the banks are allowed to release funds to cover," he noted. Page B3.
--

THE AGE (www.theage.com.au)

Elmer Funke Kupper, chief executive of the Australian Securities Exchange, has revealed that he is in "two minds" about whether some of the Australian Securities and Investments Commission's expenditure on cost recovery could be covered by a transaction levy for super-high-speed trading. "I'm still deciding whether I should go along with that idea the reason I'm hesitating is that the cost of market supervision is a consequence of the market structure the people who asked for the new market structure are now the people who don't want to pay the charge," he noted. Page B1.
--

Australian industry superannuation fund First Super, which oversees A$1.6 billion in members' savings, has announced it would follow the recommendation of the Australian Council of Superannuation Investors lobby group by supporting a move to replace Murdoch family members on the board of News Corporation with talented and reputable outsiders. The move follows a decision by two of the largest United States pension funds, the California State Teachers' Retirement System and the California Public Employees' Retirement System, to do the same. Page B1.
--

The latest quarterly report compiled by the Market Intelligence Strategy Centre researchers has found that Australia's four major banks are issuing larger discounts through their own branches and using mortgage brokers less. The study found that 59.8 percent of mortgages sold by brokers in the three months to June were backed by one of the four major lenders, down from 64 percent the same time last year. The fall is the largest reduction in the major banks' financing of mortgage brokers since the three months to September in 2007. Page B3.
--

Shelley Collins Trbuhovich, owner of the Galerie Montmartre vintage poster art firm in Melbourne, yesterday said that she and her partner, Stephan Trbuhovich, decided to expand the company after they began to run out of space in their warehouse. "The business began to grow and eventually, we though, 'Art needs to be seen' - so we made the decision to open a retail space," she said. Kate James, an executive coach at advisers Total Balance Group, said the hardest choice for small businesses was knowing when to evolve into a medium or large entity. Page B4.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Clearwire (CLWR) upgraded to Neutral from Underperform at Macquarie
Credit Suisse (CS) upgraded to Neutral from Underperform at Exane BNP Paribas
Intuitive Surgical (ISRG) upgraded to Overweight from Neutral at JPMorgan
Louisiana-Pacific (LPX) upgraded to Outperform from Sector Perform at RBC Capital
Lowe's (LOW) upgraded to Buy from Neutral at BofA/Merrill
New Oriental Education (EDU) upgraded to Outperform from Perform at Oppenheimer
Realty Income (O) upgraded to Neutral from Sell at UBS
Sprint (S) upgraded to Hold from Underperform at Jefferies
Titan International (TWI) upgraded to Buy from Hold at Jefferies
Weyerhaeuser (WY) upgraded to Outperform from Sector Perform at RBC Capital

Downgrades

BMC Software (BMC) downgraded to Market Perform from Outperform at Raymond James
Brookfield (BAM) downgraded to Hold from Buy at Canaccord
Celgene (CELG) downgraded to Perform from Outperform at Oppenheimer
Ecolab (ECL) downgraded to Neutral from Outperform at Credit Suisse
FreightCar America (RAIL) downgraded to Sell from Neutral at UBS
Harris (HRS) downgraded to Sell from Neutral at Lazard Capital
Hasbro (HAS) downgraded to Sell from Neutral at Goldman
Hercules Offshore (HERO) downgraded to Neutral from Outperform at Macquarie
Landstar System (LSTR) downgraded to Hold from Buy at BB&T
Progressive (PGR) downgraded to Sell from Neutral at Citigroup
Thompson Creek (TC) downgraded to Sector Performer from Sector Outperformer at CIBC
Travelzoo (TZOO) downgraded to Neutral from Buy at Ascendiant Capital

Initiations

Capital Bank (CBF) initiated with a Market Perform at Keefe Bruyette
Capital Bank (CBF) initiated with a Neutral at Goldman
DealerTrack (TRAK) initiated with an Overweight at Evercore
Gladstone Investment (GAIN) initiated with a Buy at Jefferies
KEYW (KEYW) initiated with an Outperform at RBC Capital
National Bank (NBHC) initiated with an Outperform at Keefe Bruyette
Omeros (OMER) initiated with an Outperform at Burrill
ServiceNow (NOW) initiated with an Equal Weight at Evercore
Trinity Industries (TRN) initiated with a Buy at UBS
Trulia (TRLA) initiated with a Neutral at JPMorgan
Trulia (TRLA) initiated with an Outperform at RBC Capital

HOT STOCKS

Softbank (SFTBF) acquired 70% stake in Sprint (S) for $20.1B
Softbank (SFTBF) stake in Sprint (S) requires no action involving Clearwire (CLWR)
Sprint (S) CEO Hesse will continue as CEO of New Sprint
Comverse (CMVT) spin-off and share distribution expected on October 31
Watson Pharmaceuticals (WPI) unit received FDA approval of generic Avapro, generic Sanctura XR
Genetic Tech (GENE) filed patent infringement suit against multiple alleged infringers
Carrizo Oil & Gas (CRZO) sold portion of its properties in the Utica Shale
Amazon (AMZN) acknowledged Kindle Paperwhite limitations including uneven lighting

NEWSPAPERS/WEBSITES

A growing number of suitors are approaching Vivendi (VIVHY) as it moves forward with potential asset sales to reduce debt and focus on media and content businesses, sources say. Private-equity owned French cable operator Numericable is among the latest to float an offer, proposing to merge with Vivendi's French telecommunications arm SFR, the Wall Street Journal reports
A weekend meeting of the IMF and World Bank drew the world's top finance officials that intensified conflicts among some of the largest economies, raising new doubts about their ability to find significant steps quickly to boost the flagging global recovery, the Wall Street Journal reports
Amazon.com (AMZN) is in advanced talks to buy the mobile chip business of Texas Instruments (TXN), according to Israeli financial newspaper Calcalist, Reuters reports
As U.S. authorities seek to make Wall Street pay for its role in triggering the financial crisis more than four years ago, banks are starting to fight back, frustrated that they are being asked to pay more than once for the same conduct, Reuters reports
Bristol Myers Squibb (BMY) is the only U.S. drugmaker among the top 12 to decline in trading this year, and investors and analysts say they don’t expect a comeback in 2012 because of drug pipeline setbacks. The company has fallen 6.1% this year, while the the Standard & Poor’s 500 Pharmaceutical Index has jumped 13%, Bloomberg reports
HSBC Holdings (HBC), the administrator of $150B in assets for hedge funds, is ending agreements with some smaller Asian clients to focus on more profitable ones, sources say, Bloomberg reports

BARRON’S:

The Dow industrials are more attractively priced now than in 2007 and that could lead to a new high by early 2013
JPMorgan (JPM) should attract more investors
BlackRock (BLK) shares could rally to $210
CarMax's (KMX) stock could climb 20% or more
Realogy Holdings (RLGY) is a play on a housing recovery
Arms merchants Applied Materials (AMAT), ASML (ASML) should prosper
Four stocks that private-equity might find attractive:
Big Lots (BIG), Charles River Labs (CRL), Guess (GES) and Terex (TEX)

There was a time when pervasive financial crimes would if not shock and appall people, then at least make them think for a minute or two. Sadly, now that even the biggest bank by assets is found to have misled regulators, shareholders and the broad public and its CEO is proven to have perjured himself before Congress, and absolutely nothing happens, not even one of those token SEC wristslap settlements, we are way past the point of even pretending to care. Which is why there is little we can comment on the news that Federico Buenrostro Jr., 62, the former CEO of the nation's largest pension fund, California's Calpers, has been indicted by a federal grand jury in a scheme to defraud Apollo Management, one of the biggest private equity firms in the nation, of $20 million. How is one supposed to have any faith, or worse, any hope that there is something more than mere criminality pushing the US capital markets to "new highs", and why is anyone surprised the retail investor has given up on the Fed-backstopped US "wealth creation mechanism" long ago.

From Reuters:

A federal grand jury has indicted former California Public Employees' Retirement System Chief Executive Officer Federico Buenrostro on conspiracy charges in connection with a scheme to commit fraud, the U.S. Department of Justice said on Monday.

 

The grand jury also indicted Alfred Villalobos, a former member of the pension fund's board, in connection with the scheme involving fraudulent documents related to a $3 billion investment of the retirement system in funds managed by Apollo Global Management.

The full story, from a year ago, courtesy of the LA Times:

Federal securities regulators sued a former chief executive and a former director of the California Public Employees' Retirement System, accusing them of scheming to defraud an investment firm of $20 million.

 

The Securities and Exchange Commission alleged that former CEO Federico Buenrostro Jr., 62, and former director Alfred J.R. Villalobos, 68, fabricated documents requested by Apollo Global Management, a New York private equity firm.

 

Apollo had hired Villalobos, a close friend of Buenrostro, as a so-called placement agent to secure billions of dollars of investments from the country's largest public pension fund.

 

The documents were used by Villalobos and his companies — Arvco Capital Research and Arvco Financial Ventures of Zephyr Cove, Nev. — to bill Apollo for helping to win private equity investment management contracts.

 

In all, Apollo paid Villalobos more than $48 million from 2005 to 2009.

 

Villalobos received at least $12 million in additional placement fees from other investment funds that managed CalPERS money.

 

Both Buenrostro and Villalobos have denied any wrongdoing. Buenrostro was not involved "in any type of fraud or illegal conduct," said his attorney, Bill Kimball.

 

Villalobos does not have an attorney, the SEC said. The telephone at Villalobos' onetime office near his Lake Tahoe mansion was disconnected.

 

The alleged phony documents were patched together to make it look as if the fees had been approved by CalPERS investment staff, the suit alleged. Apollo's lawyers had wanted Villalobos to provide them with proof that CalPERS consented to the fees.

 

"Those documents gave Apollo the false impression that CalPERS had reviewed and signed placement agent fee disclosure letters in accordance with its established procedures," the SEC said in a statement.

 

"In fact, Buenrostro and Villalobos intentionally bypassed those procedures to induce Apollo to pay placement agent fees to Villalobos' firms," the SEC said.

 

The false documents bore a fake CalPERS logo and in at least one instance a copy of Buenrostro's signature taken from an otherwise blank paper, the SEC said.

 

The suit alleged that Villalobos, Buenrostro and an Arvco staffer created the bogus documents beginning in 2007 after CalPERS investment officers were advised by their lawyers not to sign such disclosure orders.

 

"Buenrostro and Villalobos not only tricked Apollo into paying more than $20 million in placement agent fees it would not otherwise have paid, but also undermined procedures designed to ensure that investors like CalPERS have full disclosure of such fees," said John M. McCoy III, associate regional director of the SEC's Los Angeles office.

 

Buenrostro and Villalobos also are the target of a civil fraud suit brought by the California attorney general's office in Los Angeles County Superior Court.

 

And CalPERS, which has an investment portfolio valued at $235 billion, has confirmed that a federal criminal investigation is pending.

 

The SEC action is the latest by law enforcement in a probe that began in October 2009, when CalPERS released documents in a Public Records Act request that showed Villalobos was paid unusually high placement agent fees for helping Apollo and other investment firms close deals with the pension fund.

 

Philip Khinda, a Washington securities lawyer hired by CalPERS to conduct a special review of the placement agent scandal, applauded the SEC.

 

"It's another impressive action by law enforcement authorities, and I expect more from them to come," Khinda said.

 

Sure: more wristslaps of the kind that continue to make crime pay - because paying a $1 million "settlement", assuming one iscaught, when the profits throughout the life of the crime are orders of magnitude higher, not only do not serve as a deterrence mechanism, they make more financial executives seek illegal, criminal shortcuts, in hopes they can rake up enough ill-gotten booty before the SEC comes knocking, and forces them to disgorge a grand total of some 3-5% of their gains.

Sadly, this is what passes for justice in America in this day and age.

• EU to weigh extensive sanctions on Russia (FT)
• U.S. lifts flight ban to Israel (Reuters)
• Russia says will cooperate with MH17 probe led by Netherlands (Reuters)
• Norway faces ‘concrete and credible’ terrorist threat (FT)
• Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
• But... but... PMI: Unilever Sales Growth Misses Estimates on Asian Slowdown (BBG)
• World’s Biggest Wealth Fund Reviews $8 Billion Russian Stake (BBG)
• Qualcomm latest US tech company to reverse in China (FT)
• Hamptons Home Sales Rise as Buyers Find More Inventory (BBG)
• Ex-Goldman Trader’s Bitcoin Exchange to Fill Mt. Gox Void (BBG)
• Mutiny at the BOJ: Bank of Japan Majority Won’t Be Swayed by Kuroda Ideology (BBG)
• Singapore Home Prices Set to Extend Drop, Keppel Land Says (BBG)

Overnight Media Digest

WSJ

* Two Ukrainian fighter jets were shot down Wednesday over separatist-held territory not far from the site of the Malaysia Airlines crash as international outrage over the tragedy has done little to slow fighting in eastern Ukraine. (http://on.wsj.com/1pc31qs)

* The Obama administration, Israel and other Middle East allies are refashioning an Egyptian cease-fire proposal to assure Hamas that Gaza's economic interests would be addressed if the Islamist group stops rocket attacks, senior U.S. and Arab officials said. (http://on.wsj.com/1sUzA2G)

* The largest public pension fund in the U.S., the California Public Employees' Retirement System, or Calpers is expected to cut its hedge-fund investments this year by 40 percent to $3 billion. Public pensions from California to Ohio are backing away from hedge funds because of concerns about high fees and lackluster returns. (http://on.wsj.com/1nWeo4p)

* A number of major banks are looking to simultaneously settle probes into allegations of foreign-exchange rate-rigging with the U.K.'s Financial Conduct Authority, according to people familiar with the matter. Banks like Barclays PLC and UBS AG are aiming to reach individual settlements with regulators that will be announced at the same time, these people say. (http://on.wsj.com/1oeuZ8p)

* The U.S. airline industry's newfound health is breeding something not seen in years: a flock of startups. Two fledging carriers already have taken off. One is a reincarnation of the old People Express Airlines. Others are still in various stages of incubation, hoping to raise sufficient funds and receive government clearance to take wing. (http://on.wsj.com/1jWkYwU)

* Gilead Sciences Inc's Hepatitis C pill, Sovaldi, notched $3.5 billion in second-quarter sales, catapulting Gilead into the ranks of the top-selling pharmaceutical companies.(http://on.wsj.com/1z5gIi5)

* The U.S. government has asked big banks whether it should issue bonds that mature in more than 30 years. The treasury department asked 22 primary dealer banks, which underwrite U.S. government debt sales, about possible demand for ultra-long-term sovereign bonds. (http://on.wsj.com/1tDbW8r)

* Cable magnate John Malone said in an interview that Twenty-First Century Fox has long been eyeing a takeover bid for Time Warner Inc and isn't likely to face competing bidders, pouring cold water on speculation that tech companies could emerge as rival suitors for the TV and movie company. (http://on.wsj.com/1z5upNS)

* J.P. Morgan Chase & Co has sharply pulled back from a popular mortgage-lending program this year, blaming Obama administration's zeal for litigation. (http://on.wsj.com/1pdsn7k)

* The Securities and Exchange Commission told Standard & Poor's Ratings Services that it could face an enforcement action for alleged securities fraud regarding six commercial real-estate deals in 2011, according to a Wednesday filing by S&P parent McGraw Hill Financial Inc (http://on.wsj.com/1lxLKXn)

FT

BSkyB is expected to announce its European expansion on Friday, by buying Rupert Murdoch's pay-TV assets in Italy and Germany, two people familiar with the deal said.

Standard Chartered Plc Chairman Sir John Peace is weighing a succession plan, and has been urged to conduct a search both internally and externally over the next 12 months, three people familiar with the matter said.

Britain's Department of Energy and Climate Change will appeal a High Court decision which overruled its plans to drop one of Drax Group's coal-to-biomass conversion projects from a new renewable energy subsidy scheme.

UK wealth managers are facing "considerable uncertainty" as lower trading commissions in the last quarter hurt managers including Brewin Dolphin and Charles Stanley.

The Bank of England is weighing up conflicting data on Britain's labour market as it prepares to start raising interest rates off their record low of the last five years, BoE Governor Mark Carney said.

NYT

* From factory inspections to product recalls, laboratory testing to prosecutions, China's emergent food-quality apparatus has turned into reform on the fly, with ever-changing threats and setbacks. (http://nyti.ms/1sVA3la)

* Facebook Inc posted higher revenue and profit for the second quarter, driven by revenue from apps on mobile devices and advertisements shown in the news feeds. Mobile devices accounted for nearly two-thirds of the company's revenue, which rose 61 percent over the same quarter last year. (http://nyti.ms/1x33wHJ)

* The White House Rural Council will announce plans on Thursday to start a $10 billion investment fund that will give pension funds and large investors the opportunity to invest in agricultural projects. Those include wastewater systems, energy projects and infrastructure development in rural America. (http://nyti.ms/1sVilhy)

* General Motors Co recall covers 800,000 more vehicles. The auto company announced six more recalls on Wednesday for various flaws, and its worldwide recall total for 2014 is 29 million.(http://nyti.ms/1ravFed)

* For years, the wind industry has been hampered by such a severe lack of transmission lines that when the wind is strong, a local power surplus forces some machines to be shut down. Now, Texas is out to change that by conducting a vast experiment that might hold lessons for the rest of the United States. Supporters say the experiment is essential if states want to reduce reliance on fossil fuels and meet new federal rules on carbon emissions. (http://nyti.ms/1rw5Mre)

* The new rules by the U.S. Transportation Department would include measures to enhance the safety of oil trains, some of which had already been adopted by railroads on a voluntary basis in recent months, like notifying state emergency responders about train traffic, reducing speed limits or picking the safest route. (http://nyti.ms/1kcXjst)

* The resignation of Prime Minister Plamen Oresharski and his cabinet comes as Bulgaria's worst banking crisis since the 1990s threatens to take an economic toll on local businesses and foreign investors. And there may be no quick resolution of a rescue plan for troubled Corporate Commercial Bank. (http://nyti.ms/1pdV0nN)

* Nearly six years since the panic after the collapse of Lehman Brothers Holdings Inc, the Securities and Exchange Commission's new rules are intended to prevent investors from dumping their shares in funds during times of stress. (http://nyti.ms/1rMIJHU)

* After a riveting corporate shake-up that began last month after the firing of its controversial founder and chief executive, Dov Charney, American Apparel named four new members to its board. (http://nyti.ms/1sVCLqT)

Canada

THE GLOBE AND MAIL

* Canada is facing criticism over provincial jails bursting with prisoners who are presumed innocent, creating in effect a system of punishment without trial. (http://bit.ly/1pewcvI)

* The Arctic may be a hot commodity, with remarkable resource and tourism opportunities, but a conference has heard that Canada and the United States are barely out of the ice age when it comes to harnessing its growth. (http://bit.ly/WF26IL)

Reports in the business section:

* Bombardier Inc is reorganizing its operations into four divisions in a move that will cause 1,800 job losses and the retirement of Bombardier Aerospace president Guy Hachey, who held overall responsibility for the struggling C Series airplane program. (http://bit.ly/1pKtDQQ)

NATIONAL POST

* An international alert accusing a man living north of Toronto of being a mob boss went ignored by Canadian police because Canada does not recognize the crime of Mafia association, the tool used by the Italian government to tackle powerful organized crime groups, an immigration hearing heard on Wednesday. (http://bit.ly/WIsUHN)

* A Canadian group is planning to bring about 1,000 litres of water from Windsor to Detroit to protest thousands of residential service shutoffs by Detroit's water department. (http://bit.ly/1kXgS2E)

FINANCIAL POST

* Calgary, Canada's oil capital, has surpassed Ottawa as the city with the nation's highest family incomes, new data show. The median family income in the southern Alberta city rose 5.2 percent to C$98,300 ($91,700) in 2012, the most-recent reporting period, to snag top spot in the nation, Statistics Canada said on Wednesday. (http://bit.ly/1rDi4zN)

* Bombardier Inc's chief operating officer and president of the aerospace division Guy Hachey is retiring as part of a sweeping restructuring, the company said late on Wednesday. The move comes amid multiple delays in development of the flagship CSeries jet. (http://bit.ly/1peDwVB)

Britain

The Times

ANGRY STANDARD CHARTERED INVESTORS HEAP PRESSURE ON SANDS

(http://thetim.es/1nWbkFu)

One top-ten shareholder of the Standard Chartered, speaking on condition of anonymity, voiced a growing frustration that the bank needed a hands-on manager rather than a high-level thinker.

BG GROUP PONDERS 1 BLN STG NORTH SEA SALE

(http://thetim.es/1x3xwmP)

BG Group is understood to have appointed Rothschild to advise on a restructuring in a move that could result in the sale of its Armada, Everest and Lomond platforms.

The Guardian

RYANAIR TOLD TO PAY BACK 10M IN ILLEGAL STATE AID FROM FRANCE

(http://bit.ly/Uu2Oq8)

Low-cost airline Ryanair must repay nearly 10 million euros ($13.46 million) in illegal state aid it received from France for operating at three small regional airports, European Union regulators said.

BANK OF ENGLAND HOLDS INTEREST RATES AMID CONCERN FOR WAGE GROWTH

(http://bit.ly/1mGqui2)

Bank of England policymakers are growing increasingly uneasy about the UK's record low interest rates - but signalled on Wednesday that the first rise will not come until real wages start to recover.

The Telegraph

ENERGY COMPETITION PROBE TURNS UP HEAT ON THE BIG SIX

(http://bit.ly/1kWahFO)

Britain's top competition watchdog will on Thursday set out a catalogue of concerns about the UK energy sector as it begins an 18-month investigation that could result in the Big Six suppliers being broken up.

SFO TO CHARGE ALSTOM OVER 'CORRUPTION' AND MOVES AGAINST UK ARM

(http://bit.ly/WDCOum)

The Serious Fraud Office has said it will file corruption charges against Alstom "imminently", after starting proceedings against two of the French engineering giant's companies in the UK.

Sky News

SCOTTISH REFERENDUM: BANKS WEIGH NEW WARNINGS

(http://bit.ly/1oepkPZ)

Britain's biggest banks are weighing up plans to outline further risks associated with Scottish independence when they unveil half-year results with less than 50 days to go before the crucial vote.

UKTI CEO HAILS 'OPEN' EXPORTS AMID RUSSIA ROW

(http://bit.ly/1rtiQO5)

The head of the Government's trade promotion agency has hailed Britain's "clear and transparent" export control regime amid a growing row over the number of UK licences allowing arms sales to Russia.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Jobless claims for week of July 19 at 8:30--consensus 310K
Markit U.S. manufacturing PMI for July at 9:45--consensus 57.5
New home sales for June at 10:00--consensus down 5.8% to 475K rate

ANALYST RESEARCH

Upgrades

Carmike Cinemas (CKEC) upgraded to Buy from Hold at Topeka
Health Net (HNT) upgraded to Buy from Underperform at BofA/Merrill
MarketAxess (MKTX) upgraded to Outperform from Market Perform at Raymond James
PepsiCo (PEP) upgraded to Buy from Hold at Stifel
SEI upgraded to Outperform from Market Perform at Keefe Bruyette
Western Refining Logistics (WNRL) upgraded to Buy from Neutral at Goldman
Wilshire Bancorp (WIBC) upgraded to Strong Buy from Outperform at Raymond James

Downgrades

Angie's List (ANGI) downgraded to Equal Weight from Overweight at First Analysis
Angie's List (ANGI) downgraded to Neutral from Buy at BofA/Merrill
Angie's List (ANGI) downgraded to Neutral from Buy at Janney Capital
Angie's List (ANGI) downgraded to Neutral from Buy at MKM Partners
Angie's List (ANGI) downgraded to Perform from Outperform at Oppenheimer
Angie's List (ANGI) downgraded to Sector Perform from Outperform at RBC Capital
Boeing (BA) downgraded to Neutral from Buy at BofA/Merrill
Freeport McMoRan (FCX) downgraded to Neutral from Buy at BofA/Merrill
IDEX Corp. (IEX) downgraded to Neutral from Buy at Janney Capital
Magellan Midstream (MMP) downgraded to Neutral from Buy at Goldman
Owens Corning (OC) downgraded to Hold from Buy at Stifel
Pacific Coast Oil (ROYT) downgraded to Market Perform from Outperform at Wells Fargo
Praxair (PX) downgraded to Market Perform from Outperform at William Blair
Qualcomm (QCOM) downgraded to Equal-Weight from Overweight at Evercore
Qualcomm (QCOM) downgraded to Neutral from Positive at Susquehanna
Questar (STR) downgraded to Neutral from Buy at Citigroup
TAL International (TAL) downgraded to Underperform from Neutral at BofA/Merrill
Theravance (THRX) downgraded to Neutral from Buy at BofA/Merrill
Tractor Supply (TSCO) downgraded to Market Perform from Outperform at William Blair
TripAdvisor (TRIP) downgraded to Hold from Buy at Cantor

Initiations

CECO Environmental (CECE) initiated with a Buy at Canaccord
CyrusOne (CONE) initiated with an Equal Weight at Barclays
Equinix (EQIX) initiated with an Equal Weight at Barclays
Markit (MRKT) initiated with a Hold at Jefferies
Zafgen (ZFGN) initiated with an Outperform at Leerink

COMPANY NEWS

Facebook (FB) reported mobile daily active users up 31% year-over-year
Standard Chartered (SCBFF) board dismissed succession plan rumors
McGraw Hill Financial (MHFI) announced that on July 22, it received a "Wells Notice" from the SEC stating that the agency’s staff made a preliminary determination to recommend that the Commission institute an enforcement action against Standard & Poor's Ratings Services, alleging violations of federal securities laws with respect to S&P's ratings of six commercial mortgage backed securities transactions issued in 2011
Spectranetics (SPNC) received FDA clearance for atherectomy products, Turbo-Tandem and Turbo Elite
Engaged Capital reported a 7% stake in Jamba (JMBA) and announced that they had discussions with management
American Apparel (APP) named four new board members, including one woman
Cliffs Natural (CLF) lowered U.S. iron ore production view to low end of prior outlook

EARNINGS

Companies that beat consensus earnings expectations last night and today include:

Facebook (FB), Qualcomm (QCOM), Ford (F), Wyndham (WYN), Eli Lilly (LLY), Diamond Offshore (DO), Carter's (CRI), Patterson-UTI Energy (PTEN), Starwood (HOT), Proto Labs (PRLB), Potash (POT), Logitech (LOGI), Weatherford (WFT), CoStar Group (CSGP), O'Reilly Automotive (ORLY), PTC Inc. (PTC), CVB Financial (CVBF), Ethan Allen (ETH), Core Laboratories (CLB), Oceaneering (OII), Teradyne (TER), Horizon Bancorp (HBNC), IPC The Hospitalist Co. (IPCM), Graco (GGG), Cliffs Natural (CLF), Susquehanna (SUSQ), Astoria Financial (AF), Equifax (EFX), Berkshire Hills Bancorp (BHLB), Raymond James (RJF), Fortinet (FTNT), Tyler Technologies (TYL), WesBanco (WSBC), Quantum (QTM), Financial Institutions (FISI), Everest Re (RE), Allegiant Travel (ALGT), Assurant (AIZ), Polycom (PLCM), E-Trade (ETFC), Umpqua Holdings (UMPQ), Illumina (ILMN), Covenant Transportation (CVTI), Skechers (SKX), Citrix (CTXS), CA Technologies (CA), NeuStar (NSR), Sangamo (SGMO), F5 Networks (FFIV), TriQuint (TQNT), Healthways (HWAY), QCR Holdings (QCRH), AngioDynamics (ANGO), Hanesbrands (HBI), Gilead (GILD), Banner Corp. (BANR), Chemed (CHE), Cirrus Logic (CRUS)

Companies that missed consensus earnings expectations include:

AT&T (T), TripAdvisor (TRIP), Encana (ECA), NorthWestern (NWE), NorthWestern (NWE), WESCO (WCC), Cabot Microelectronics (CCMP), Quality Systems (QSII), Precision Castparts (PCP), The Bancorp (TBBK), MSA (MSA), Heritage-Crystal Clean (HCCI), Terex (TEX), TAL International (TAL), TriState Capital (TSC), Old Second Bancorp (OSBC), Morningstar (MORN), TESSCO (TESS), Interface (TILE), Horace Mann (HMN), Allied World (AWH), CoreLogic (CLGX), Cheesecake Factory (CAKE), InspireMD (NSPR), Flowserve (FLS), StanCorp (SFG), Torchmark (TMK), Angie's List (ANGI)

Companies that matched consensus earnings expectations include:

Sequans (SQNS), Dunkin' Brands (DNKN), Capital Bank (CBF), Radware (RDWR), United Community Banks (UCBI), Sallie Mae (SLM), Guaranty Bancorp (GBNK), United Financial (UBNK), OFG Bancorp  (OFG), United Stationers (USTR), Allison Transmission (ALSN), 8x8, Inc. (EGHT), Datawatch (DWCH), Tractor Supply (TSCO)

NEWSPAPERS/WEBSITES

Qualcomm (QCOM) confirmed in China as having monopoly, China Daily reports
Watchdog says Google (GOOG) evokes memories meant to be omitted, Bloomberg reports
Bombardier (BDRBF) to cut 1,800 aerospace jobs in revamp, Reuters reports
Carlyle (CG) to be last PE firm to face bid-rigging trial, NY Post reports
Deutsche Bank (DB) CFO faces internal criticism following financial reporting exposure, WSJ reports
Police arrest seven in connection to StubHub (EBAY) cyberfraud case, Re/code reports
Investors shouldn't wait too long to buy Apple (AAPL), Barron's says

SYNDICATE

Government Properties (GOV) 13.5M share Spot Secondary priced at $23.50
Immune Design (IMDZ) 5M share IPO priced at $12.00
Intersect ENT (XENT) 5M share IPO priced at $11.00
JMP Group (JMP) files $100M mixed securities shelf
NRG Yield (NYLD) 10.5M share Secondary priced at $54.00
Pfenex (PFNX) 8.33M share IPO priced at $6.00
Townsquare Media (TSQ) 8.3M share IPO priced at $11.00

• Maliki digs in as U.S. pushes for new Iraq government (Reuters)
• Ukraine's forces say close to taking rebel-held Donetsk (Reuters)
• Anger Over Michael Brown Shooting Leads to Looting (WSJ)
• German Economy Backbone Bending From Lost Russia Sales (BBG)
• Kinder Morgan to Consolidate Empire (WSJ)
• Early Failure to Detect Gaza Tunnel Network Triggers Recriminations in Israel (WSJ)
• You’ll never guess how much BuzzFeed raised from Horowitz (FT)
• The dumb money is now chasing Chinese oligarchs: Norway’s Wealth Fund Buys $576 Million of Mayfair Area (BBG)
• Clinical trial to start soon on GSK Ebola vaccine (Reuters)
• No drone skeet shooting any time soon (WSJ)
• Erdogan Extends Rule to 2019 With Vision for a New Turkey (BBG)
• Blackstone: from US landlord to US shalelord, nears Deal For Shell's 50% Haynesville Shale Stake (WSJ)
• GM must face suit claiming it covered up ignition-switch defect (Reuters)
• How Bond Traders Profited Off U.S. Wage of $24.45 an Hour (BBG)
• U.S. to monitor South China Sea, talks with Australia on regional defense (Reuters)

Overnight Media Digest

WSJ

* Islamist extremists who have overrun swaths of Iraq made a rare retreat in an area hit by U.S. air strikes and gave up some territory they had won from Kurdish forces, in an early sign of impact from the three-day-old American campaign. (http://on.wsj.com/1kvlfam)

* Israel's early failure to detect the vast Hamas tunnel network that its forces destroyed in Gaza is triggering a wave of recriminations within the country's security and political establishment. (http://on.wsj.com/XV52Bh)

* Alaska, the state which staked most of its economy on energy in the 1970s after oil was found on the North Slope, is now competing with, and often losing out to, places with hotter oil fields-especially North Dakota. More people left Alaska than settled in the state between 2012 and 2013, while North Dakota added residents, according to state and federal census data. (http://on.wsj.com/1vw7n4B)

* Kinder Morgan Inc is consolidating its vast oil-and-gas pipeline empire into a single company amid investor worries about the enterprises' growth prospects. (http://on.wsj.com/1uEAX3J)

* Blackstone Group LP is nearing a deal to buy Royal Dutch Shell PLC's half-interest in the Haynesville Shale, a huge Louisiana gas field, in a deal that could value the stake at more than $1 billion. (http://on.wsj.com/1A6y3rf)

* Widespread use of commercial drones is likely to take significantly longer than many proponents of the budding industry anticipate, according to U.S. and Canadian aviation regulators. (http://on.wsj.com/1oVnkfs)

* U.S. factories that were idled during the recession are now humming with activity. Office and apartment buildings have less empty space. Unemployment is falling, while wages and benefits are growing slowly. However, conditions aren't quite back to what was normal before the 2008 financial crisis. (http://on.wsj.com/1oVntPP)

* A summer of geopolitical unrest is rattling markets, but despite a recent downturn, investors' optimistic view of U.S. stocks has been largely unscathed. A wave of risk aversion has punished stocks and fueled the largest-ever retreat from junk bonds. Investors are contending with violence in Ukraine, Iraq and the Gaza Strip, along with news that Italy faces its third recession since 2008 and Germany's industrial production is slowing. Yet many fund managers say that unless the unrest increases and threatens the global growth outlook, the case for buying U.S. stocks appears stronger than that for bonds and many other assets. (http://on.wsj.com/1vw8v8d)

* The largest U.S. public pension plan is considering a dramatic retreat from some riskier investments, as it tries to simplify its $295 billion in holdings and better protect against losses during the next market downturn, according to people familiar with the matter. California Public Employees' Retirement System is weighing whether to exit or substantially reduce bets on commodities, actively managed company stocks and hedge funds, the people said. (http://on.wsj.com/1plYNRg)

* Citigroup Inc and Swiss-based trader Mercuria Energy Group are battling in a London court over payments relating to metals-backed financing arrangements in China valued at over $270 million. The case between Mercuria and Citigroup is one of several brought by companies scrambling to limit their exposure to potential losses after the Chinese government launched an investigation into allegations of loan fraud at the ports. (http://on.wsj.com/1A6zkyD)

* Hachette Book Group said Amazon.com Inc is motivated by profits and market share at the expense of authors and bookstores, as the companies' contentious contract talks over e-book pricing continues. (http://on.wsj.com/1kvmSoq)

* At least 2.2 million people have already watched "The Expendables 3." The problem for the movie's distributor, Lions Gate Entertainment Corp, is that its big-budget action movie doesn't open until Friday. (http://on.wsj.com/1A6m7G2)

FT

Hedge fund firm Brevan Howard is battling a court case filed by former trader Christopher Rokos, who is asking for his five-year non-compete to be overturned, so that he can launch his own hedge fund.

The tensions between Russia and the west over Ukraine will not derail Austrian energy group OMV AG's plans to extend Gazprom OAO's South Stream gas pipeline from the Hungarian border to Vienna, and any delays would be manageable, Chief Executive Gerhard Roiss said.

South Africa's central bank has placed African Bank Investments under curatorship, as it announces a rescue plan for the lender of unsecured loans that involves a capital injection of nearly a $1 billion.

High-frequency traders in London are increasingly quitting investment banks in favour of specialised trading firms, as they try to escape tighter restrictions on pay and the looming threat of new regulations banning proprietary trading.

Proposals under consideration by the International Accounting Standards Board (IASB) to limit how pension surpluses can be booked, if enforced, could result in more than 25 billion pounds ($42 billion) being wiped off the balance sheets of UK's biggest companies.

The criminal investigation into former traders of the Royal Bank of Scotland Group Plc over Libor manipulation could spill over into next year, with the Serious Fraud Office requesting UK's financial regulator to postpone publishing its civil findings against at least two of the traders.

NYT

* Buzzfeed, the viral media site will use a $50 million investment to diversify its content, expand its video arm and create an in-house incubator for new technology. (http://nyti.ms/1sEgJWf)

* It is not clear to the executives of Microsoft Corp how the Chinese authorities believe that they violated the country's antimonopoly law. For months, Microsoft was in private discussions over competition issues with the State Administration of Industry and Commerce. (http://nyti.ms/1sM20dW)

* Pipeline group Kinder Morgan Inc, will acquire its three associated companies and re-form as a traditional corporation worth $140 billion. (http://nyti.ms/1A6xo9l)

* Hedge fund investors, furious at having their bond holdings in Portugal's Banco Espírito Santo written down to zero, are weighing legal action against Portuguese regulators. (http://nyti.ms/1oo6Ygv)

* SafeNet is selling itself for $890 million to Dutch digital security company Gemalto NV. The deal shows the limitations of a possible ban on inversions. (http://nyti.ms/1oCwsB2)

* The Royal Bank of Scotland Group PLC is revamping its controversial unit that assists businesses facing serious financial difficulties, according to a person briefed on the matter. The unit, the Global Restructuring Group, will be disbanded and replaced by a new restructuring group to be headed by Laura Barlow, who joined the bank in 2009, said the person. (http://nyti.ms/XUVeXQ)

China

CHINA SECURITIES JOURNAL

- China has made its first effort to coordinate property registration in urban and rural regions to help protect farmers' rights and improve the government's efficiency. Such registration has been divided because of administrative turf.

- China's monetary policy is not likely to be further loosened in the second half of this year compared with the first half as the government's targeted easing has checked the slowdown in the country's economic growth, the newspaper said in a commentary.

SHANGHAI SECURITIES NEWS

- Zhengzhou became the latest Chinese city to lift property controls to support a cooling market and help safeguard the country's economic growth.

- China has nearly completed a clean-up of regional equity trading venues and regulators are set to issue new regulations to govern local stock trading practices before the end of this year.

- China is poised to hold its first-ever commodity futures innovations conference in September.

CHINA DAILY

- China's police plan to put greater focus on investigating emigrants who have obtained citizenship abroad but have not cancelled their Chinese household registration, as part of government efforts against graft.

PEOPLE'S DAILY

- The disciplinary commission of the ruling Communist Party of China has opened a special web page for citizens to inform about officials using public funds to send moon cakes as gifts during the forthcoming Mid-Autumn Festival, in the party's latest move to fight against corruption.

Russia

VEDOMOSTI

www.vedomosti.ru

- Transit of Russian oil and gas to the European Union could be affected by a bill Ukrainian parliamentarians are planning to pass on August 12. The new legislation is aimed at halting the activity of 65 Russian companies operating in the country.

- US oil major ExxonMobil and Rosneft started joint drilling of a well on Saturday in an offshore oilfield of Russia's Kara Sea in the Arctic.

- Sales of new cars and light commercial vehicles in Russia fell by almost 23 percent in July and reached the level of 2010.

- Russia will boost the production of Tupolev-204SM medium-range airliners to compensate for the problems of Dobrolet discount airline hit by sanctions.

- Russia's defence ministry has dismissed accusations of planning to use troops to accompany humanitarian aid to Ukrainian civilians in the zone of military activity.

KOMMERSANT

www.kommersant.ru

- Russia's businessmen are proposing that the Finance Ministry raise profit tax to 9 percent from the current 5 percent, for subsidiaries in Cyprus, the Netherlands, Switzerland and Luxembourg of Russian companies outside the energy and banking sectors, which could increase tax revenues from these companies by 70-80 percent.

- Western sanctions are threatening Rosneft's plan to create its own oil trading business, the daily says, after Italy's Saras halted negotiations on the formation of a trading joint venture after the Russian state oil major was hit by the sanctions.

IZVESTIA

www.izvestia.ru

- Four Russian parliamentarians from the Just Russia party could face a ban on leaving Russia because of unpaid taxes, the daily says, adding that their joint tax debt has reached 10.4 billion roubles.

Britain

The Times

PRESSURE ON BALFOUR TO RESUME DEAL TALKS

Balfour Beatty Plc will reveal this week that it is still hoping to sell its Parsons Brinckerhoff subsidiary as it tries to convince investors that it can survive without Carillion Plc.

MONARCH HAS RYANAIR AND EASYJET IN ITS SIGHTS

A wide-ranging review of the travel group behind Monarch may result in a sale of the budget airline. The strategic review is exploring the budget carrier's ownership, financing and operations as it seeks to mount a challenge to easyJet Plc and Ryanair Holdings Plc.

The Guardian

APPEAL COURT BATTLE BREWS OVER GREENE KING TAX AVOIDANCE SCHEME

Greene King Plc is to take its long-running battle to prove the legality of a controversial tax avoidance scheme to the court of appeal despite two defeats in the lower tax courts and condemnation from a Treasury minister and other MPs.

The Telegraph

ALEX SALMOND ADMITS THERE IS NO PLAN B AS HE INSIST SCOTLAND WILL KEEP POUND

Alex Salmond has ignored opinion polls and growing signs of discontent inside his own party by insisting that an independent Scotland would keep the pound "come what may".

PUNCH DIRECTOR CLOSES IN ON RESTRUCTURING WINDFALL

Steve Dando, Punch Taverns Plc's finance director, is in line for a bonus worth up to 275,000 pounds as a reward for concluding the pubs group's tortuous debt restructuring, which will enter the final furlong this week when proposals for a debt-for-equity swap are formally launched.

CROWN ESTATE FENDS OFF FOREIGN BIDDERS TO BUY SLICE OF MAYFAIR FROM CHURCH OF ENGLAND

The Queen's property company has teamed up to buy a 64.2 percent slice of prime Mayfair estate, it was announced on Sunday. The deal saw the Crown Estate partner with Norway's sovereign wealth fund to add a stake in nearly 400-year-old Pollen Estate to its portfolio, a plot of land that had belong to the Church of England.

Sky News

HUNTSWORTH BOSS TO STEP DOWN AFTER PAY REVOLT

Conservative peer Lord Chadlington who heads public relations groups Huntsworth Plc is to step down weeks after a major revolt by shareholders over his pay package.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

No significant domestic economic reports scheduled for today.

ANALYST RESEARCH

Upgrades

Achillion (ACHN) upgraded to Outperform from Market Perform at Wells Fargo
Achillion (ACHN) upgraded to Overweight from Neutral at Piper Jaffray
Central European Media (CETV) upgraded to Neutral from Sell at Goldman
Chuy's (CHUY) upgraded to Outperform from Market Perform at Raymond James
Frank's International (FI) upgraded to Neutral from Sell at Goldman
GNC Holdings (GNC) upgraded to Outperform from Neutral at Credit Suisse
Gulfport Energy (GPOR) upgraded to Buy from Hold at Stifel
Hanger  (HGR) upgraded to Buy from Neutral at SunTrust
Huntington Ingalls (HII) upgraded to Buy from Neutral at UBS
Hyatt Hotels (H) upgraded to Buy from Hold at Stifel
PepsiCo (PEP) upgraded to Buy from Neutral at UBS
Southwest Gas (SWX) upgraded to Buy from Hold at Brean Capital
Tesla (TSLA) upgraded to Buy from Hold at Deutsche Bank

Downgrades

2U (TWOU) downgraded to Neutral from Buy at Goldman
Crestwood Equity (CEQP) downgraded to Market Perform from Outperform at Wells Fargo
Fairway Group (FWM) downgraded to Market Perform from Outperform at William Blair
King Digital (KING) downgraded to Sector Perform from Outperform at Pacific Crest
Oshkosh (OSK) downgraded to Neutral from Overweight at JPMorgan
Wal-Mart (WMT) downgraded to Hold from Buy at Jefferies

Initiations

CareDx (CDNA) initiated with a Buy at Mizuho
CareDx (CDNA) initiated with an Overweight at Piper Jaffray
Mavenir Systems (MVNR) initiated with an Outperform at Cowen
Roka Bioscience (ROKA) initiated with an Outperform at Leerink
TRI Pointe Homes (TPH) resumed with a Buy at Citigroup
iRadimed (IRMD) initiated with a Buy at Roth Capital

COMPANY NEWS

Kinder Morgan (KMI), Kinder Morgan Energy Partners (KMP), Kinder Morgan Management (KMR) and El Paso Pipeline Partners (EPB) announced that KMI will acquire all of the outstanding equity securities of KMP, KMR and EPB. KMP unitholders will receive 2.1931 KMI shares and $10.77 in cash for each KMP unit
Sanofi (SNY), MannKind (MNKD) announced a global licensing agreement for Afrezza
Amazon (AMZN) urged customers to express opinions on e-book prices with Hachette
Cubist (CBST) issued a voluntary nationwide recall of nine lots of CUBICIN

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Warren Resources (WRES), Motorcar Parts (MPAA), Hawaiian Electric (HE)

Companies that missed consensus earnings expectations include:
Nordic American Tankers (NAT), Pembina Pipeline (PBA)

Companies that matched consensus earnings expectations include:
Sterling Construction (STRL), Magic Software (MGIC)

NEWSPAPERS/WEBSITES

Blackstone (BX) nears deal to buy Shell's (RDS.A) stake in Haynesville shale, WSJ says
Amazon (AMZN) stops preorders of some Disney (DIS) movie titles, WSJ reports
Boeing (BA) 787 production snags re-emerge at assembly plant, Reuters reports
HSBC (HSBC) pledges to retain private bank as a standalone division, FT reports
Snapchat's fundraising talks with Alibaba (BABA) are over, Bloomberg says
RBS (RBS) plans to sell international arm of Coutts, Reuters reports
U.S. judge rejects Apple (AAPL), Google (GOOG) antitrust hiring accord, Bloomberg reports (INTC, ADBE)
Zillow (Z) could fall by 50% after Trulia (TRLA) deal, Barron's says
Procter & Gamble (PG) could return 10% in six months, Barron's says
Intel (INTC) should see more gains, Barron's says

SYNDICATE

Cerus (CERS) files $250M mixed securities shelf
China Jo-Jo Drugstore (CJJD) files $30M mixed securities shelf
Kandi Technologies (KNDI) files to sell 1.43M shares of common stock for holders
MoSys (MOSY) files $50M mixed securities shelf
TOP Ships (TOPS) requests withdrawal of registration statement
Zoe's Kitchen (ZOES) files to sell 4M shares of common stock

• Thank you market Chief Risk Officer Bernanke/Yellen: Calpers to Exit Hedge Funds, Divest $4 Billion Stake (BBG)
• World stocks hit one-month low, caution ahead of Fed (Reuters)
• U.S. Efforts to Build Coalition Against Islamic State in Iraq, Syria Are Hampered by Sectarian Divide (WSJ)
• Wildfires rage in California drought, hundreds forced to flee (Reuters)
• Time to throw away some more good money: Sears Borrows $400 Million From Lampert’s ESL Investments (BBG)
• United Offers $100,000 Buyouts to Flight Attendants (BBG)
• Biggest Banks Said to Overhaul FX Trading After Scandals (BBG)
• You mean you have to pay? Administration threatens to cut off ObamaCare subsidies to 360,000 (The Hill)
• RBS Said to Dismiss Most of Team Overseeing Central Europe Debt (BBG) they will be hired by the ECB
• Boeing-Lockheed venture said teaming with Bezos on rocket engine (Reuters)
• German Investor Confidence Falls to Weakest Since 2012 (BBG)
• Blackstone Group seeks to raise $16 billion for its latest fund (WSJ)
• U.K. Inflation Slows to Match 5-Year Low on Food Prices (BBG)
• Ditching Monarchy Is Step Too Far for Scots Nationalists (BBG)
• European Stocks Fall to Two-Week Low Before Fed Meeting (BBG)
• How a Facebook Group Persuaded Coca-Cola to Rerelease Surge (BBG)

Overnight Media Digest

WSJ

* The U.S. military will deploy about 3,000 personnel to West Africa to coordinate international aid, build treatment centers and train health-care workers as part of President Barack Obama's offensive against a rapidly worsening Ebola outbreak, a senior administration official said Monday. (http://on.wsj.com/1sdLCzh)

* Anheuser-Busch InBev NV is talking to banks about financing a potential megadeal, perhaps reaching 75 billion pounds ($121.67 billion), to buy global beer rival SABMiller Plc , according to a person familiar with the matter. (http://on.wsj.com/1m9VAon)

* Citigroup Inc released more details about what a severe recession might look like in coming years and how it could affect the firm, as large U.S. banks run themselves through tests to prepare for next year's Federal Reserve checkup. (http://on.wsj.com/1wn0LlK)

* It's no secret that many physicians hate the electronic-medical-records systems they use, saying they are cumbersome, poorly designed and detract from patient care. Amplifying those concerns, the American Medical Association on Tuesday is calling for a major overhaul of EMR systems to make usability and high-quality patient care a higher priority. (http://on.wsj.com/1tZAFTO)

* The largest U.S. public pension plan is getting out of hedge funds as part of an effort to simplify its assets and reduce costs, a retreat that could prompt other cities and states to consider similar moves. The California Public Employees' Retirement System said Monday it would shed its entire $4 billion investment in hedge funds over the next year. (http://on.wsj.com/1DdcZ57)

* Microsoft Corp is hoping a cult videogame built around virtual blocks will help fix the company's real-world problems, even if the brains behind the brand aren't sticking around. The software giant's $2.5 billion deal to buy Mojang AB, maker of the Minecraft videogame, gives Microsoft an entertainment property whose devoted fans dress up like game characters, pack YouTube with how-to guides and rush to sign up for Minecraft-themed summer camps. (http://on.wsj.com/1BHM1km)

* Sears Holdings Corp is borrowing $400 million from Chief Executive Edward Lampert's hedge fund, giving the retailer an infusion for the holidays after it burned through cash over the summer. (http://on.wsj.com/1BHNIyc)

* Alibaba Group Holding Ltd <IPO-BABA.N>, which is in the middle of marketing what could be the world's largest initial public offering, now thinks it could do a little better. The Chinese e-commerce firm has raised the deal's price range to $66 to $68 per share, up from the current $60 to $66 a share. Alibaba didn't increase the number of shares that can potentially be sold. (http://on.wsj.com/1uAhfrf)

FT

Alibaba Group Holding Ltd <IPO-BABA.N> has considerably boosted the amount it plans to raise in its listing on Friday to $66 to $68 after high investor demand in the Chinese e-commerce company.

The largest U.S public pension fund Calpers said it plans to terminate its hedge fund programme, due to a severe blow to a sector that has brought increasing scepticism over its returns. At a time when the future of North Sea oil has become a significant battleground on account of the debate on Scottish independence, ConocoPhillips, the U.S. energy group is looking to sell its stake in the United Kingdom's largest oilfield. Berlin is pushing Google Inc to disclose the details of the search engine company's secret formula that has allowed it to monopolise web search in Europe, in a move that is likely to be welcomed by competitors and firmly repelled by the U.S tech company.

Microsoft Corp Chief Executive Officer Satya Nadella's plans to buy Swedish games company Minecraft for $2.5 billion, his first big acquisition, was probably not what the investors at Wall Street had in mind when they were looking for a statement about Nadella's plans for his company.

NYT

* The California Public Employees' Retirement System, United States' largest pension fund, will eliminate all of its hedge fund investments over the next year on concerns that investments are too complicated and expensive. The pension fund, which oversees $300 billion, said on Monday that it would liquidate its positions in 24 hedge funds and six hedge fund-of-funds - investments that total $4 billion and more than 1 percent of its total investments under management. (http://nyti.ms/1tZbfpm)

* The Federal Communications Commission will hold a round-table discussion on Tuesday to examine whether proposed net neutrality rules should cover mobile broadband. The battle lines will probably be clear: the cellphone companies against nearly everyone else. (http://nyti.ms/1phqEh9)

* The death toll from General Motors Co faulty ignition switch is rising. From the time it began recalling cars for the defect over the winter, G.M. has never publicly revised its original assessment that 13 people died in accidents linked to the problem, saying only that the number could rise. But on Monday, the lawyer GM hired to develop a program to compensate victims raised the automaker's tally by nearly 50 percent. (http://nyti.ms/1AQQKxD)

* With demand for the Alibaba Group Holding's stock market debut proving even stronger than expected, the Chinese e-commerce giant has done the only logical thing: set its fund-raising sights even higher. The company raised the price range for its initial public offering to $66 to $68 for each American depositary share, up from $60 to $66, according to a regulatory filing on Monday, pushing up its potential haul from the stock sale to as much as $21.8 billion. (http://nyti.ms/1r1oHuI)

* New York State's attorney general filed an antitrust lawsuit on Monday seeking to stop Actavis Plc from forcing patients with Alzheimer's disease to switch to a new version of a widely used drug. The lawsuit contends that the switch is designed to blunt competition from low-priced generic versions of the medication. (http://nyti.ms/YN5QJ1)

* As the city announced a final settlement on Monday with Syncora Guarantee Inc, a creditor that had been one of its chief adversaries, other creditors pressed their opposition to Detroit's plans to emerge from bankruptcy. (http://nyti.ms/ZnvoMZ)

* Miscues by university management and more tepid investment returns have pulled down Harvard's results over the last decade, culminating in the June resignation of Jane Mendillo, the chief executive of the Harvard Management Company, who started just before the market collapse in July 2008. Medillo's performance illustrates not only the vicissitudes of investing but also the revolving-door aspect of an operation like the Harvard endowment, where retaining top talent can be difficult because of the intense scrutiny and the availability of bigger paychecks elsewhere. (http://nyti.ms/ZnvyUu)

Canada

THE GLOBE AND MAIL

** Prime Minister Stephen Harper is promising tax cuts for Canadians in a matter of months, using an election-style rally to fire up conservative troops as Parliament returns and signalling the campaign to win in 2015 has begun in earnest. (bit.ly/XtYZmB)

** Canada is donating C$2.5 million worth of the specialized medical gear used to protect health-care workers who are treating Ebola patients in West Africa, the federal government announced late Monday. (bit.ly/1uCxELH)

** Wind Mobile is poised to announce a deal that will give it the financial backing it needs to become a viable fourth player in Canada's wireless industry. The company's Canadian founder is set to buy out Wind's foreign owner and recapitalize the wireless carrier with the backing of several financial players. (bit.ly/1mamnkA)

NATIONAL POST

** Newly sworn-in Alberta Premier Jim Prentice has appointed a new but smaller cabinet, including two people who aren't members of the legislature. The new cabinet has 16 ministers and three associate ministers, in addition to the premier, down from 19 ministers and 10 associate ministers under former premier Alison Redford. (bit.ly/1uF0477)

** John Tory announced on Monday he is pulling out of three mayoral debates this week, as his campaign re-calibrates with Doug Ford in the race. (bit.ly/1DdYIoP)

** Nathan Jacobson, the self-described "radioactive" businessman close to senior conservatives, cleared his name Monday in a San Diego courtroom. Justice Janis Sammartino accepted a deal reached between federal prosecutors and Jacobson's lawyer allowing Jacobson to withdraw his 2008 guilty plea for money laundering in connection with an online pharmacy. (bit.ly/1nZGddT)

China

SECURITIES TIMES

- China's securities regulator plans to allow asset management units of brokerages to sell products that channel money into private equity.

- Nine government-owned companies in Yunnan province, including Yuntianhua Group and Yunnan Coal Chemical Industry Group Co, have publicly solicited outside investment into 33 subsidiary projects, as part of China's efforts to diversify the ownership structure of state-owned enterprises.

CBN

- Chinese film producer Huayi Brothers Media Corp said it would invest $130 million to set up a unit in the United States.

CHINA SECURITIES NEWS

- The China Securities Regulatory Commission has approved 11 companies to pursue initial public offerings.

SHANGHAI DAILY

- Officials from China's government departments and state-owned firms have been withdrawing from executive MBA programmes after the government banned pricey training courses in July.

Britain

The Times

FRENCH TV FURY OVER ASSAULT BY NETFLIX France's heavily regulated television industry was in uproar yesterday amid the launch of Netflix Inc, the American video streaming service. Critics say the service threatens to destroy France's so-called cultural exception - the notion that it is resistant to Anglo-Saxon entertainment. (http://thetim.es/1BHdxhX)

MCDONALD'S EASES MCMUFFIN RULES AMID SALES DECLINE The world's biggest fast-food chain, McDonald's Corp is considering a new menu segment to lure customers during a time of day, between the breakfast rush and lunch hour, when its restaurants often are quiet. The idea has arisen after the company's worst global same-store sales drop in 10 years, in which Britain provided a single glimmer of hope. (http://thetim.es/1wmFZ5B)

The Guardian

OECD SLASHES GROWTH FORECASTS FOR LEADING ECONOMIES

The global economy faces headwinds from a sluggish eurozone and rising political tensions, including the uncertain outcome of Scotland's independence referendum, a leading thinktank has warned. The Organisation for Economic Co-operation and Development slashed its growth forecasts for advanced economies and called on the European Central Bank to use quantitative easing to shore up the eurozone. (http://bit.ly/1s41wSx)

COCA-COLA TO SPONSOR LONDON EYE The Coca-Cola Co is to become the new sponsor of the London Eye after signing a deal to replace France's EDF Energy Plc. The capital's giant ferris wheel has been a leading tourist attraction since it was introduced in 2000, when it was known as the Millennium Wheel. It was previously sponsored by British Airways before becoming the EDF Energy London Eye in 2011. (http://bit.ly/1q9iKXd)

The Telegraph SCOTTISH REFERENDUM: DAVID CAMERON BEGS SCOTS NOT TO LEAVE THE UK British Prime Minister David Cameron begged the people of Scotland not to leave the United Kingdom as he promised them that he "won't be here forever." In a final plea before Thursday's referendum, the prime minister warned Scottish voters in a speech in Aberdeen that separation would be a "painful divorce." (http://bit.ly/1uEheli)

ROW BETWEEN PHONES 4U AND VODAFONE OVER CAUSE OF COLLAPSE A bitter row over the collapse of Phones 4U broke out on Monday when Vodafone Group Plc strongly rejected claims it acted improperly in pulling out of the chain, pinning the blame instead on the decision by its private equity owners to load it with high-interest debt and collect a 200 million pounds ($324.54 million) windfall. (http://bit.ly/1m9phWx)

Sky News CBI DENIES GOVT PRESSURE ON SCOTLAND VOTE The president of the Confederation of British Industry, Michael Rake, has insisted no pressure has been exerted on businesses by the government to speak out on the Scottish referendum debate. (http://bit.ly/1qEorT8)

ALIBABA FLOTATION ON COURSE FOR WORLD RECORD China's biggest online retailer appears on course to break the record for the biggest share sale of all time this week. Expectations are growing that Alibaba Holding Group Ltd <IPO-BABA.N> will raise its price target above the planned $60 to $66 per-share range - with sources, said to be familiar with the deal, telling Reuters there was "overwhelming" demand for the stock. (http://bit.ly/1tYuC1S)

The Independent

MICROSOFT BUYS MINECRAFT STUDIO MOJANG FOR $2.5 BLN Microsoft Corp has announced that it has purchased Mojang, the Swedish studio behind the popular game Minecraft, for $2.5 billion (http://ind.pn/1AQQ6An)

SCOTTISH INDEPENDENCE: COMMERZBANK SAYS WORST CASE ECONOMIC SCENARIOS 'EXAGGERATED' Days after Deutsche Bank reignited the Scottish "no" campaign with terrifying fears that a vote for independence would plunge Scotland back into a 1930s style depression, a rival German financial company, Commerzbank AG, has said such speculation has been overdone. (http://ind.pn/1AQQdMq)

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Producer Price Index for August at 8:30--consensus flat with prior month

ANALYST RESEARCH

Upgrades

21Vianet (VNET) upgraded to Outperform from Sector Perform at Pacific Crest
Anglo American (AAUKY) upgraded to Buy from Hold at Deutsche Bank
AngloGold (AU) upgraded to Overweight from Neutral at HSBC
Approach Resources (AREX) upgraded to Neutral from Underperform at Sterne Agee
Athlon Energy (ATHL) upgraded to Buy from Neutral at BofA/Merrill
BE Aerospace (BEAV) upgraded to Overweight from Neutral at JPMorgan
Duke Energy (DUK) upgraded to Outperform from Market Perform at Wells Fargo
Microsoft (MSFT) assumed with an Outperform from Sector Perform at RBC Capital
Pearson (PSO) upgraded to Overweight from Equal Weight at Morgan Stanley
SYNNEX (SNX) upgraded to Buy from Hold at Stifel
Tableau (DATA) upgraded to Outperform from Neutral at Credit Suisse
Terex (TEX) upgraded to Buy from Hold at Stifel

Downgrades

Adobe (ADBE) assumed with a Sector Perform from Outperform at RBC Capital
Analogic (ALOG) downgraded to Hold from Buy at Brean Capital
Bankrate (RATE) downgraded to Sell from Hold at Topeka
Con-way (CNW) downgraded to Neutral from Outperform at RW Baird
Cummins (CMI) downgraded to Market Perform from Outperform at Wells Fargo
Laredo Petroleum (LPI) downgraded to Neutral from Buy at BofA/Merrill
Occidental Petroleum (OXY) downgraded to Equal Weight from Overweight at Barclays

Initiations

ACI Worldwide (ACIW) initiated with a Neutral at Sterne Agee
Ardmore Shipping (ASC) initiated with a Buy at MLV & Co.
Benefitfocus (BNFT) initiated with an Outperform at RBC Capital
Boston Beer (SAM) initiated with an Outperform at Cowen
Brown Forman initiated with an Outperform at Cowen
Capital Product (CPLP) initiated with a Buy at Deutsche Bank
Coca-Cola (KO) initiated with a Market Perform at Cowen
Concur (CNQR) initiated with an Outperform at RBC Capital
Constellation Brands (STZ) initiated with a Market Perform at Cowen
Craft Brew (BREW) initiated with an Outperform at Cowen
Diana Shipping (DSX) initiated with a Buy at Deutsche Bank
Dr Pepper Snapple (DPS) initiated with a Market Perform at Cowen
DryShips (DRYS) initiated with a Buy at Deutsche Bank
Dynagas LNG (DLNG) initiated with a Buy at Deutsche Bank
Global Payments (GPN) initiated with a Neutral at Piper Jaffray
Heartland Payment (HPY) initiated with a Buy at Sterne Agee
Intuit (INTU) initiated with an Outperform at RBC Capital
Lionsgate (LGF) initiated with a Buy at ISI Group
MasterCard (MA) initiated with a Buy at Sterne Agee
MasterCard (MA) initiated with an Overweight at Piper Jaffray
Molson Coors (TAP) initiated with an Outperform at Cowen
Monster Beverage (MNST) initiated with a Market Perform at Cowen
Navios Acquisition (NNA) initiated with a Buy at Deutsche Bank
Net 1 UEPS (UEPS) initiated with a Buy at Sterne Agee
NetSuite (N) initiated with an Outperform at RBC Capital
Oracle (ORCL) assumed with a Sector Perform at RBC Capital
PepsiCo (PEP) initiated with an Outperform at Cowen
SAP (SAP) initiated with a Sector Perform at RBC Capital
SEI Investments (SEIC) initiated with a Buy at Sterne Agee
Scorpio Bulkers (SALT) initiated with a Buy at Deutsche Bank
Seaspan (SSW) initiated with a Buy at Deutsche Bank
StealthGas (GASS) initiated with a Buy at Deutsche Bank
Teekay Tankers (TNK) initiated with a Buy at Deutsche Bank
Tesla (TSLA) initiated with a Buy at ISI Group
Textainer (TGH) initiated with a Hold at Deutsche Bank
Total System (TSS) initiated with a Neutral at Sterne Agee
Tsakos Energy (TNP) initiated with a Buy at MLV & Co.
Ultimate Software (ULTI) initiated with an Outperform at RBC Capital
Ultratech (UTEK) initiated with an Outperform at Imperial Capital
Vantiv (VNTV) initiated with a Buy at Sterne Agee
Visa (V) initiated with a Buy at Sterne Agee
Visa (V) initiated with an Overweight at Piper Jaffray
WEX Inc. (WEX) initiated with a Buy at Sterne Agee
Western Union (WU) initiated with a Neutral at Sterne Agee
Workday (WDAY) initiated with an Outperform at RBC Capital
Yelp (YELP) initiated with a Neutral at RW Baird
zulily (ZU) initiated with an Outperform at RW Baird

COMPANY NEWS

Valeant (VRX), Pershing Square, Allergan (AGN) settled pending litigation before DE Court. Pursuant to the settlement, Allergan has agreed to unconditionally call and hold a special meeting of its shareholders on December 18
Humana (HUM) announced $2B share repurchase authorization
Airbus (EADSY) Defense, Space said it will sell some divisions, including Fairchild Controls, Rostock System-Technik, AvDef, ESG and Atlas Elektronik
In a severely adverse scenario Citigroup's (C) total risked based capital ratio would be 10.9% through Q216; For projected stressed capital ratios, JPMorgan (JPM) reported that Tier 1 common ratio would be a minimum of 8.4%, Tier 1 leverage ratio would be a minimum of 6.4%, and Tier 1 risk-based capital ratio would be a minimum of 8.7%
AstraZeneca (AZN), Eli Lilly (LLY) to jointly develop, commercialize AZD3293

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Analogic (ALOG)

Companies that missed consensus earnings expectations include:
Full Circle Capital (FULL), Ixia (XXIA), Student Transportation (STB), Majesco (COOL)

Espey Mfg (ESP) reports Q4 EPS (31c) vs. $1.02 a year ago
Analogic (ALOG) sees FY15 revenue to grow mid single-digits , consensus $572.12M

NEWSPAPERS/WEBSITES

Actavis (ACT), Forest Labs subsidiary sued by NY attorney general, Reuters says
Google (GOOG) called on by Berlin to disclose search engine formula, FT reports
Boeing (BA), Lockheed (LMT) ally with Amazon (AMZN) CEO on rocket engine, Reuters says
Boeing (BA) may beat out SpaceX for NASA contract to ferry astronauts, WSJ reports
Qualcomm (QCOM) accused of bribing Chinese official, WantChinaTimes reports
ConocoPhillips (COP) auctioning 24% stake in the Clair oilfield, FT reports
Pratt & Whitney (UTX) close to engine supply deal with Pentagon, WSJ reports (LMT, NOC, BAESY)
iPhone 6/6 Plus may suffer similar iPhone 5s/5c inventory issues, DigiTimes says (AAPL)

SYNDICATE

Alcoa (AA) announces proposed offering of 25M depositary shares
Blueknight Energy Partners (BKEP) files to sell 8.5M shares
Gastar Exploration (GST) offers 17M shares of common stock
Lehigh Gas (LGP) files to sell 3.6M common units representing limited partners
Viper Energy (VNOM) 3.5M share Secondary priced at $28.50

• Stick to tapering and rates pledge, says Boston Fed chief (FT)
• Turkey to let Iraqi Kurds reinforce Kobani as U.S. drops arms to defenders (Reuters)
• Obama makes rare campaign trail appearance, some leave early (Reuters)
• Japan GPIF to Boost Share Allocation to About 25%, Nikkei Says (BBG)... or three months of POMO
• Japan Stocks Surge on Report GPIF to Boost Local Shares (BBG)
• China Growth Seen Slowing Sharply Over Decade (WSJ)
• Russia, Ukraine Edge Closer to Natural-Gas Deal (WSJ)
• Leveraged Money Spurs Selloff as Record Treasuries Trade (BBG)
• After clashes, Hong Kong students, government stand their ground before talks (Reuters)
• Female cabinet members’ resignations undermine Abe’s recovery efforts in Japan (WaPo)
• Nigeria declared Ebola-free after containing virus (Reuters)
• Value Investors Hoarding Cash See Few Bargains After Rout (BBG)

Overnight Media Digest

WSJ

* Democrats, worried as polls show their chances of retaining control of the Senate dwindling, are plowing money into long-shot races in unexpected states. (http://on.wsj.com/1sEDmLA)

* In a blow to Prime Minister Shinzo Abe's government, Japan's industry minister announced her resignation on Monday over allegations of financial impropriety. Yuko Obuchi is the first cabinet minister to step down since Abe came to power in December 2012. (http://on.wsj.com/1CISk5O)

* The Fed is likely to end its bond-buying program this month even as market volatility and uncertainties about the global economy have rattled investors and led to some mixed messages from central-bank officials. (http://on.wsj.com/1CIRI07)

* An investor group from Hong Kong and Abu Dhabi is launching a bid to buy Reebok from Adidas in a move that would unwind a disappointing eight-year marriage of the sneaker makers. (http://on.wsj.com/1t1hDPt)

* Nearly six years after its near-death experience, Ally Financial Inc is nearly out from the U.S. government's clutches, and taxpayers are earning a profit of more than $1 billion as the firm heads out the door. (http://on.wsj.com/1sEDmLA)

* A lawsuit against Walgreen Co paints a picture of the rough and tumble maneuverings inside a company grappling with disappointing earnings, activist hedge funds and a major deal. The suit by former Chief Financial Officer Wade Miquelon alleges Walgreen's chief executive and a company board member defamed him in meetings with large shareholders that became the basis of a page-one article in The Wall Street Journal. (http://on.wsj.com/1wqJGJ7)

* Syngenta AG faces escalating legal battles over its sale of genetically engineered corn seeds that some farmers and agricultural companies say have roiled international grain markets this year. U.S. farmers in 11 states have sued Syngenta in federal courts during the past few weeks, alleging losses they say arose from the Swiss seed-and-chemical company's move to sell biotech seeds before the corn was approved by Chinese authorities for import there. (http://on.wsj.com/1y8kp5I)

* Pension-fund managers across the United States are rethinking their investments in hedge funds in the wake of a retreat by the California Public Employees' Retirement System. (http://on.wsj.com/10bZMdX)

* California is hoping to conjure some real-life jobs in the smoke-and-mirrors world of visual effects for movies and television shows-part of the state's latest attempt to win back its most famous industry. (http://on.wsj.com/10bZMdX)

* When cold weather looms across the United States, natural-gas prices usually rise. This year they are falling, after a record production boom nearly replenished stockpiles left at their lowest since 2003 by last winter's freeze. (http://on.wsj.com/1vzXaC7)

FT

European Commission President Jose Manuel Barroso has warned UK Prime Minister David Cameron that he will strive to write new EU freedom of movement rules for they are an integral part of Britain's internal market. Barroso said a proposal from the British Government to cap on immigration from Europe would probably breach EU rules.

Britain's financial watchdog aims to curb resource-heavy probe into alleged benchmark rigging. The financial regulator will issue a number of private warnings this year, what legal experts alert that it could lead to "enforcement by the back door".

London-based bitcoin exchange, Coinfloor, is planning to strengthen its trade operations by raising money from investors in order to trade a wide range of currencies and launch a bitcoin fund.

Royal Bank of Scotland Group Plc, which is set to enter the peer-to-peer lending market, marks the latest sign of alternative finance getting a grip by moving into the mainstream.

NYT

* Yahoo is betting that Tumblr's alliances with popular television shows like "The Voice" will help drive its growth. Still, 16 months after Yahoo Inc paid $1.1 billion for Tumblr, the company's investors are questioning the success of the acquisition. Independent online research firm eMarketer says that while Tumblr's growth rate is faster than that of competitors such as Pinterest or Instagram, its audience remains the smallest. (http://nyti.ms/1psBeTQ)

* On Sunday afternoon, IBM Corp issued a statement saying it would make an announcement on Monday. IBM did not provide any further details but analysts say the most likely possibility is that IBM's long-running negotiations to shed its computer chip manufacturing operations have resulted in a deal. (http://nyti.ms/1rVokgL)

* The Washington Post continued its expansion over the weekend by adding a national edition. Local newspapers across the nation can now deliver with their Sunday papers a 24-page color tabloid edition of the Washington Post. Stephen P. Hills, president and general manager of the Post, said by email that local newspapers would sell the weekly edition "as an add-on to their subscriptions" and that it would include local advertising. (http://nyti.ms/1psCDd1)

* The Federal Reserve still plans to wrap up its bond-buying campaign at the end of October and remains likely to raise interest rates in mid-2015, although it now seems less likely to act sooner, analysts say. (http://nyti.ms/1wYTLuQ)

Canada

THE GLOBE AND MAIL

** Ottawa continued to auction off stockpiled medical supplies to the public, even after the World Health Organization requested the protective gear amid an Ebola outbreak raging in West Africa. (http://bit.ly/1wqV73A)

** Ontario is considering funding spots for graduate students from abroad, bowing to pressure from universities that say their global competitiveness is harmed because they have to turn away qualified foreign applicants due to lack of money. (http://bit.ly/1t1QZGv)

** TransCanada Corp's C$11 billion Energy East pipeline project has run into another stumbling block in Quebec as public opposition mounts over a possible threat to the endangered beluga whales in the St Lawrence River. The Calgary-based pipeline company is still awaiting provincial government permission to continue its exploratory and drilling work on a planned export terminal at Cacoun. (http://bit.ly/1wqVGub)

NATIONAL POST

** Beginning next year, the Royal Canadian Mounted Police is aiming for the first time to enroll just as many women as men in its training academy in Regina. (http://bit.ly/1yQptic)

** Liberal leader Justin Trudeau said he would impose greater discipline on himself to avoid making off-the-cuff remarks that his opponents could use against him. In an interview with the Ottawa Citizen, Trudeau acknowledged that his own jokes had sometimes given political fodder to critics. (http://bit.ly/1ptdQph)

** Canada could generate up to C$32 billion more in exports over the next 10 years if it creates a yuan trading hub to do business in the world's fastest growing currency, the Canadian Chamber of Commerce said in a new report. The chamber joined the call of some of Canada's largest banks and financial institutions to promote Canada as a center for renminbi (yuan) trading. (http://bit.ly/1urKfhl)

China

SHANGHAI DAILY

- Violent clashes erupted in Hong Kong early on Sunday, despite the scheduling of two hours of talks on Monday between the government and students protest leaders.

CHINA DAILY

- The European Union has decided not to launch an anti-subsidies investigation into Chinese telecommunications equipment makers, helping avoid trade wars between the world's two major economies.

- The annual Beijing Marathon was held on Sunday as planned despite the heavy smog, while competitors wearing masks triggered controversy.

PEOPLE'S DAILY

- The fourth Plenary Session of the 18th Central Committee of the ruling Communist Party of China, which will start on Monday, will open a new page in the improvement of the country's legal system, this mouthpiece of the party said in an editorial.

CHINA SECURITIES JOURNAL

- The latest injection of liquidity into commercial banks by the People's Bank of China signalled the government's continued policy to conduct targeted easing to help curb the slowdown in China's economy, economists said.

SHANGHAI SECURITIES NEWS

- Five companies face delisting within 30 days after the China Securities Regulatory Commission on Friday issued new rules to get loss-making companies or those in violation of regulatory practices to delist.

Britain

The Times

VIRGIN WAITS BEFORE SEEKING ITS MONEY Days after a rival bank was forced to cancel its stock market flotation, Virgin Money <IPO-VMH.L> has delayed its own 2 billion pounds ($3.22 billion) listing because of the recent collapse in equities worldwide. The lender said that it planned to price its shares "as soon as constructive market conditions allow", but it would not complete a listing by the end of this month. (http://thetim.es/1sZRUH4) HEDGE FUNDS TO SNAP UP TESCO'S ASIA ASSETS Some of the world's largest private equity groups are planning to make offers for Tesco's 9 billion pound Asian business as the ailing supermarket group prepares to publish its delayed results next week. (http://thetim.es/1yPQ5jy)

The Guardian

BARROSO WARNS CAMERON THAT ARBITRARY MIGRATION CAP WOULD BREACH EU LAW UK Prime Minister David Cameron has suffered a blow to his EU reform plans after the outgoing president of the European commission, Jose Manuel Barroso, said an arbitrary cap on free movement within the EU would be incompatible with European law. (http://bit.ly/1yPTIGc) WATCHDOG TO PURSUE INQUIRY INTO SEX STING AGAINST MP BROOKS NEWMARK

The Independent Press Standards Organisation (Ipso) is to continue to investigate the Sunday Mirror for the sex sting carried out against MP Brooks Newmark even though the complaint against the newspaper has been dropped. This will be the first time that a press regulator has continued to investigate a complaint in the absence of a complainant. It follows new rules by the industry in the wake of the Leveson inquiry into the failures of newspaper publishers that followed the phone-hacking scandal. (http://bit.ly/1t3f1Sd)

The Telegraph

PRUDENTIAL BACKS 1 BLN STG TIDAL POWER PROJECT Prudential Plc is poised to become the key investor in a 1 billion pound tidal power station, securing the future of the infrastructure project. The FTSE 100 insurer, through its investment arm M&G, is to inject up to 100 million pounds in the Swansea Bay Tidal power station. The insurer will be the cornerstone investor in the project, which is scheduled to open in 2018. The backing from Prudential means the project is now likely to get the go ahead. (http://bit.ly/1nuphRN)

DELTA: AIRLINES WILL ALWAYS FIGHT FOR SPACE AT HEATHROW OVER GATWICK Delta Air Lines Inc, the US airlines giant, has warned that global carriers will continue to fight for space at Heathrow, even if Gatwick is selected for expansion. The carrier, which owns a 49 percent stake in Virgin Atlantic , said any solution to Britain's looming aviation capacity crunch must involve some expansion at Heathrow because the business traveller market surrounding the west London hub is too valuable to surrender. (http://bit.ly/1rm1Jdc)

Sky News

BRITISH FIRMS CONSIDER PAYING FOR EGG FREEZING British companies have said they would consider following Apple Inc and Facebook Inc's lead by paying for female staff to freeze their eggs. This week one of Europe's largest fertility clinics is opening on the edge of the city of London. (http://bit.ly/1wqyOei)

HURRICANE GONZALO TRIGGERS UK GALES ALERT

Gusts of up to 70mph threaten to cause travel disruption and difficult driving conditions as the tail end of Hurricane Gonzalo hits Britain. Gales are expected to affect much of the country on Tuesday, leading the Met Office to issue a "yellow" weather warning for most parts, including the Midlands, northern England, Wales, Northern Ireland, and western Scotland. (http://bit.ly/11So6BZ)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

No major domestic economic reports scheduled for today.

ANALYST RESEARCH

Upgrades

AIG (AIG) upgraded to Buy from Hold at Deutsche Bank
Align Technology (ALGN) upgraded to Buy from Neutral at Goldman
Align Technology (ALGN) upgraded to Outperform from Neutral at Credit Suisse
Alliance Holdings (ahgp) upgraded to Buy from Neutral at Citigroup
Allison Transmission (ALSN) upgraded to Outperform from Neutral at Credit Suisse
BNY Mellon (BK) upgraded to Neutral from Sell at Goldman
Brown Formanupgraded to Buy from Neutral at SunTrust
CONSOL (CNX) upgraded to Buy from Neutral at Citigroup
Comerica (CMA) upgraded to Market Perform from Underperform at Bernstein
Comerica (CMA) upgraded to Neutral from Reduce at Nomura
E-Trade (ETFC) upgraded to Conviction Buy from Buy at Goldman
Freeport McMoRan (FCX) upgraded to Neutral from Sell at Citigroup
Hospitality Properties (HPT) upgraded to Buy from Hold at Stifel
Intrawest Resorts (SNOW) upgraded to Buy from Neutral at Goldman
KeyCorp (KEY) upgraded to Buy from Hold at Deutsche Bank
Micron (MU) upgraded to Outperform from Sector Perform at Pacific Crest
Newmont Mining (NEM) upgraded to Buy from Neutral at Citigroup
News Corp. (NWSA) upgraded to Neutral from Underperform at Macquarie
Prosensa (RNA) upgraded to Overweight from Underweight at JPMorgan
Swift Transport (SWFT) upgraded to Buy from Neutral at Citigroup
TD Ameritrade (AMTD) upgraded to Buy from Neutral at Goldman
TerraForm Power (TERP) upgraded to Overweight from Neutral at JPMorgan
Unum Group (UNM) upgraded to Outperform from Market Perform at Raymond James
Western Alliance (WAL) upgraded to Outperform from Market Perform at Keefe Bruyette

Downgrades

Ambit Biosciences (AMBI) downgraded to Neutral from Buy at Citigroup
American Capital downgraded to Market Perform from Outperform at JMP Securities
Avista (AVA) downgraded to Sell from Neutral at UBS
BancFirst (BANF) downgraded to Market Perform from Outperform at Raymond James
CGG SA (CGG) downgraded to Sell from Neutral at Goldman
CareFusion (CFN) downgraded to Hold from Buy at Stifel
Cliffs Natural (CLF) downgraded to Sell from Neutral at Citigroup
DENTSPLY (XRAY) downgraded to Neutral from Buy at Goldman
Mead Johnson (MJN) downgraded to Hold from Buy at Deutsche Bank
PNC Financial (PNC) downgraded to Hold from Buy at Deutsche Bank
People's United (PBCT) downgraded to Market Perform from Outperform at Raymond James
Preferred Bank (PFBC) downgraded to Outperform from Strong Buy at Raymond James
Primerica (PRI) downgraded to Market Perform from Outperform at Raymond James
Principal Financial (PFG) downgraded to Market Perform from Outperform at Raymond James
Seadrill (SDRL) downgraded to Neutral from Buy at Citigroup
Stillwater Mining (SWC) downgraded to Neutral from Overweight at JPMorgan
Westar Energy (WR) downgraded to Neutral from Buy at UBS

Initiations

CONE Midstream (CNNX) initiated with a Neutral at Citigroup
CONE Midstream (CNNX) initiated with a Neutral at Goldman
CONE Midstream (CNNX) initiated with a Neutral at JPMorgan
CONE Midstream (CNNX) initiated with an Outperform at Credit Suisse
CONE Midstream (CNNX) initiated with an Outperform at RBC Capital
CONE Midstream (CNNX) initiated with an Outperform at RW Baird
CONE Midstream (CNNX) initiated with an Outperform at Wells Fargo
CyberArk (CYBR) initiated with a Hold at Deutsche Bank
CyberArk (CYBR) initiated with a Neutral at JPMorgan
CyberArk (CYBR) initiated with an Equal Weight at Barclays
FNFV (FNFV) initiated with an Outperform at Keefe Bruyette
MannKind (MNKD) initiated with a Neutral at Goldman
Medley Management (mdly) initiated with a Buy at Deutsche Bank
Medley Management (mdly) initiated with an Outperform at Credit Suisse
Pall Corp. (PLL) initiated with an Outperform at Cowen
Sensata (ST) reinstated with an Overweight at Barclays
Vail Resorts (MTN) initiated with a Neutral at Goldman
Vitae Pharmaceuticals (VTAE) initiated with a Buy at Stifel
Vitae Pharmaceuticals (VTAE) initiated with an Outperform at BMO Capital
Vitae Pharmaceuticals (VTAE) initiated with an Outperform at JMP Securities

COMPANY NEWS

GLOBALFOUNDRIES to acquire IBM's (IBM) microelectronics business for cash consideration of $1.5B that is expected to be paid to GLOBALFOUNDRIES by IBM over the next three years
Cleco (CNL) to be acquired by a group of North American long-term infrastructure investors led by Macquarie Infrastructure and Real Assets and British Columbia Investment Management Corporation, together with John Hancock Financial and other infrastructure investors for $55.37 per share in cash, or about $4.7B
Elliott Advisors expressed concerns over Family Dollar (FDO) merger, nominated slate of seven candidates for election to the Family Dollar board at the company’s annual meeting (DLTR, DG)
QEP Resources (QEP) sells midstream business to Tesoro Logistics (TLLP) for $2.5B (QEPM)
Honeywell (HON) sees $280B in business jet deliveries from 2014 to 2024

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Hasbro (HAS)

Philips (PHG) reports Q3 net income EUR (103M) vs. EUR 281M last year
SAP (SAP) cuts FY14 operating profit view to EUR 5.6B-EUR 5.8B from EUR 5.8B-EUR 6B
SAP (SAP) reports Q3 Non-IFRS EPS EUR 0.84 vs EUR 0.78 last year

NEWSPAPERS/WEBSITES

Yahoo (YHOO) to unveil turnaround, M&A strategy on Tuesday, WSJ reports
Tesco (TSCDY) accounting probe reveals staff's 'inappropriate behavior,' Telegraph reports
Carnival (CCL) cruise passenger tests negative for Ebola, Reuters reports (TKMR, SRPT, BCRX, CMRX, NLNK)
Danone (DANOY) says not carrying out review on Mead Johnson (MJN) takeover, Reuters reports
CBS (CBS) could see 25% gain, Barron's says
Schlumberger (SLB) is inexpensive and has room to rise, Barron's says
Western Digital (WDC) looks like inexpensive big data play, Barron's says
Post Holdings (POST) shares look attractive, Barron's says

SYNDICATE

Adamis Pharmaceuticals (ADMP) files to sell 2.84M shares for holders
Community Financial (TCFC) files $75M mixed securities shelf
First Busey (BUSE) files $250M mixed securities shelf
Netlist (NLST) files $40M mixed securities shelf
Nuvilex files $50M mixed securities shelf
Sears (SHLD) files automatic mixed securities shelf

• The fake: Avon-Offer Hoax Shows It’s Easy to Put One Over on SEC’s Edgar (BBG)
• And the real: US buyout group TPG snaps up UK discounter Poundworld (FT)
• El Niño near-certain to last through summer: U.S. climate center (Reuters)
• Oil Sands Land Becomes Alberta’s Hot Real Estate as Oil Rebounds (BBG)
• SEC a stumbling block in banks' forex guilty pleas: sources (Reuters)
• Pimco’s Stocks Chief Maisonneuve to Leave as Funds Closed (BBG)
• Bank of America’s Woes Test ‘Fixer’ CEO (WSJ)
• Puerto Rico Governor, Lawmakers Agree on Revenue Proposal (BBG)
• The weathermen strike back: economists are counting on the U.S. to bounce back in 2015 (WSJ)
• U.S., China set for high-stakes rivalry in skies above South China Sea (Reuters)
• Boiler Rooms Meet Boardrooms as Scammers Invade London City (BBG)
• Philadelphia train crash engineer lays low as scrutiny heats up (Reuters)
• Calpers Puts Portion of Timber Holdings Up for Sale (WSJ)
• Are We Headed for an Egg Shortage? (BBG)
• Barclays Said to Face US Fine for Breaching Libor Settlement (BBG)
• Facebook tramples on European privacy laws: Belgian watchdog (Reuters)
• In U.S. cities, Republicans are looking for a few good losers for 2016 (Reuters)

Overnight Media Digest

WSJ

* Two influential proxy advisory firms have urged Intel Corp shareholders to vote against the re-election of director John Donahoe, eBay Inc's president and chief executive, citing what they characterized as a poor attendance record. (http://on.wsj.com/1cCjuFm)

* Five years into the job, Bank of America boss Brian Moynihan struggles to move past the financial crisis, testing his reputation as a "fixer" and the patience of shareholders who have grown restless with his progress in turning around the company. (http://on.wsj.com/1e4pzLP)

* Pacific Investment Management Co said it would exit from two of its equity strategies and say goodbye to its chief investment officer of global equities, the latest setback for the bond behemoth's long-running effort to expand in the world of stock-fund investing. (http://on.wsj.com/1d0Pyn8)

* UBS AG had held out hope that the Justice Department would look past alleged violations of a 2012 settlement related to alleged interest-rate rigging. That hope has been dashed. (http://on.wsj.com/1KQ7paD)

* A Perella Weinberg Partners LP banker and his father have been charged with participating in an insider-trading scheme involving information related to the acquisitions of five healthcare companies. (http://on.wsj.com/1L5rx9s)

* U.S. President Barack Obama strengthened military backing for Arab allies, who in turn offered him support to pursue a "verifiable" nuclear deal with Iran despite their deep skepticism over its possible security consequences. (http://on.wsj.com/1H5ogDn)

* Dozens of companies are sprouting to help U.S. food makers tackle a wave of new federal safety regulations and intensified enforcement of the nation's food laws. (http://on.wsj.com/1bTymyf)

* The nation's large public pension fund is looking to chop its ownership of U.S. timber. The California Public Employees' Retirement System, or Calpers, is seeking buyers for roughly 300,000 acres of forestry largely in Louisiana amid a broader review of its timber holdings. (http://on.wsj.com/1Fo7aFN)

FT

Britain's Poundworld, the pound store operator, has sold a majority stake to U.S. private equity firm TPG, securing new funds to speed up store expansion.

One European wireless carrier told the Financial Times that it has installed software that prevents most types of advertising from loading in Web pages and apps, in its data centres and planned to turn it on before the end of 2015.

Sebastian Mikosz, chief executive officer of Polish flag-carrier Lot Airlines, revealed that the airline is in active talks with operators and private equity groups over a government plan to shift the company into private hands.

NYT

* The ruble has risen so robustly that the Russian central bank on Thursday reversed a long-running policy of propping it up. Under a new plan, the central bank will buy foreign currencies to replenish its reserves, a move that will effectively weaken the ruble. (http://nyti.ms/1cCod9V)

* A firm calling itself PTG Capital Partners disclosed on Thursday in a regulatory filing that it had offered to buy cosmetics company Avon Products for $18.75 a share. The filing, from what was supposedly a British investment firm, caused an immediate sensation after news wire services flashed headlines of the offer to their trading customers. Shares of Avon, which had opened the day's trading at $6.71, jumped by more than $1. (http://nyti.ms/1K9pwLL)

* Bank of America Merill Lynch has set up a group to help companies raise money through private fund-raising, the investment bank announced in an internal memorandum on Thursday. The banks said Sachin Aggarwal and Warren Fixmer will lead the team. (http://nyti.ms/1bTs6qm)

* Pandora Media Inc will have to pay Broadcast Music Inc 2.5 percent of its revenue, a United States district court in Manhattan ruled, on Thursday. (http://nyti.ms/1IBFM81)

* In the latest volley in the music world's digital price war, Rdio, which competes with both Spotify and Pandora, has introduced a limited subscription version at $4 a month - significantly lower than the industry's $10 default price. (http://nyti.ms/1K9r7Bq)

China

CHINA SECURITIES JOURNAL

- Nearly five million new investors stepped into China's A-share stock market last month, while the total existing accounts amounted to over 80 million at the end of April, according to data from the China Securities Depository and Clearing Corporation Ltd.

SECURITIES TIMES

- Pork giant Henan Shuanghui will invest 1.83 billion yuan ($295 million) to expand into chicken business. The company is hoping to become a supplier to McDonald's Corp and Yum Group's KFC, the paper said citing sources close to the matter.

SHANGHAI SECURITIES NEWS

- Certain changes will be made to adjust oil stipend for buses in China to push forward the upgrade to new energy vehicles, the ministries of Finance, Industry and Information Technology, and Transport said on Thursday.

CHINA DAILY

- China will promote experiences from environmental friendly provinces to the whole country to curb air pollution and create a better environment by 2020, Minister of Environmental Protection Chen Jining said on Thursday.

Britain

The Times

FROM MARKET STALL TO 100 MILLION POUNDS PAYDAY

In a sign of the rising profitability of cut-price stores that undercut supermarkets, TPG Capital Management LP, the American buyout firm, has agreed to purchase a majority stake in Poundworld. (http://thetim.es/1E87O38)

TALKTALK ACCUSES BT OF 'BULLYING' TACTICS

The chief executive of TalkTalk Telecom Group Plc has accused BT Group Plc's management of trying to bully the new government after her rival threatened to pull the plug on an upgrade to the country's broadband network if it is broken up. (http://thetim.es/1e4fDBU)

The Guardian

VAROUFAKIS REFUSES ANY BAILOUT PLAN THAT WOULD SEND GREECE INTO 'DEATH SPIRAL'

Greece's embattled finance minister, Yanis Varoufakis, stepped up his war of words with eurozone policymakers on Thursday, saying he wished his country still had the drachma, and would not sign up to any bailout plan that would send his country into a "death spiral". (http://bit.ly/1QNOvVV)

The Telegraph

MARIO DRAGHI HITS BACK AT CRITICS OF QE AS GREEK WOES CONTINUE

Mario Draghi has hit back at critics of the European Central Bank's bond-buying programme, insisting that the bank's actions would help households and businesses prepare for higher interest rates in the future. (http://bit.ly/1d07rlQ)

LLOYDS CHAIRMAN: OSBORNE COULD SELL ENTIRE TAXPAYER STAKE IN 12 MONTHS

Lloyds Banking Group Plc's chairman, Lord Blackwell, has suggested the Government's entire remaining stake in the bank could be sold off within a year. (http://bit.ly/1A3qqGD)

Sky News

JIM O'NEILL NAMED AS A TREASURY MINISTER

Jim O'Neill, who chaired Goldman Sachs Asset Management following the financial crisis, will be commercial secretary to the Treasury and known as Lord O'Neill. (http://bit.ly/1E87ZLy)

BRAIT SNAPS UP NEW LOOK IN 1.9 BLN DEAL

Brait SE, the private equity vehicle of Christo Wiese, will announce on Friday that it has reached agreement with fashion retailer New Look's shareholders to buy the company. (http://bit.ly/1e4gsKZ)

• Charting the Market: New Month, Same China (BBG)
• China jitters send stocks tumbling (Reuters)
• Oil falls on weak China factory data (Reuters)
• Euro zone factory growth eases in August despite modest price rises (Reuters)
• Euro-Area Joblessness Falls to Lowest Level Since Early 2012 (BBG)
• Clinton friend advised on U.S. politics, foreign policy (Reuters)
• Korea exports slump as Asia's woes deepen (Reuters)
• Greenlight Capital Down 14% for Year; David Einhorn Surveys Investors (NYT)
• U.S. weighs sanctioning Russia as well as China in cyber attacks (Reuters)
• China’s Economic Woes Echo Across Asia (WSJ)
• Headlines from 2010-2015: Economists Are Split Over Whether the Fed Will Raise Rates in September (BBG)
• Manhattan Gets First Crowdfunded Condos (BBG)
• China to set up $9 billion fund for small, medium-sized firms - state radio (Reuters)
• Glorious Property Misses More Loan Repayments as Sales Drop (BBG)
• Nasdaq to Sell Surveillance Technology to China (WSJ)
• The Science Behind Trump-Mania (BBG)

Overnight Media Digest

WSJ

- Oil prices soared Monday, marking their strongest three-day rally since Iraq's 1990 invasion of Kuwait, on doubts the global glut of crude would be as long-lasting as many investors and traders had earlier believed. (http://on.wsj.com/1KXzziL)

- Years before natural and organic foods exploded in popularity, cereal behemoth Kellogg Co acquired one of the segment's pioneers: Kashi Co. Fixing its Kashi brand is key to bulking up sales in the fast-growing natural and organic food aisles, says Kellogg Chief Executive John Bryant. (http://on.wsj.com/1JtpEBi)

- California lawmakers gave final approval to legislation that seeks to ensure equal compensation for women in the workplace by prohibiting employers from paying differing wages to employees who do "substantially similar work." (http://on.wsj.com/1UiRQ4q)

- A patent law change pushed by the pharmaceutical industry could cost federal healthcare programs $1.3 billion over a decade by delaying new generic drugs, the Congressional Budget Office estimates. (http://on.wsj.com/1hPRwsQ)

- Two major public pension funds joined the drive for Bank of America Corp shareholders to oppose a corporate bylaw change that lets Brian Moynihan serve as both chief executive and chairman. California Public Employees' Retirement System and California State Teachers' Retirement System sent a letter to the bank Monday disclosing they will vote against the change. (http://on.wsj.com/1FefYZT)

- Four months after announcing a sweeping U.S. recall, ice-cream maker Blue Bell Creameries LP is embarking on one of the food industry's more ambitious recovery attempts. The Texas company's ice-cream cartons began reappearing in grocery stores in several cities on Monday, a major step after Blue Bell yanked all of its products following a deadly listeria outbreak and confronted a financial crisis that nearly put it out of business. (http://on.wsj.com/1PHVgHk)

- Americans for Tax Fairness, a progressive advocacy group, is pressing craft marketplace Etsy Inc to abandon a strategy that uses an Irish subsidiary to minimize taxes it owes to Uncle Sam. The coalition of labor unions and think tanks has written a letter to B Lab, asking the nonprofit to make its recertification of Etsy contingent on the company ditching its Irish tax strategy, according to a copy of the letter reviewed by The Wall Street Journal. (http://on.wsj.com/1JIsqSt)

FT

Maersk Oil has received approval by the UK's Oil & Gas Authority to develop the largest gas field discovered in the UK North Sea in more than a decade, the Danish oil company said on Monday. Maersk Oil and its co-venture partners, JX Nippon and BP Plc, will invest around 3 billion pounds ($4.61 billion) in the development.

Commodity trader Trafigura said it raised its stake in Pacific Exploration & Production Corp to more than 10 percent, strengthening its ties with the Canadian oil and gas producer.

The Scottish government said on Monday that Jim McColl's Ferguson Marine Engineering was the bidder it preferred to build two vessels for the state-owned Caledonian Maritime Assets fleet.

NYT

- The Chinese Ministry of Public Security has punished at least 197 people in recent days for "spreading rumors" online, it said. Its announcement did not give details, but the accused have presumably been detained. (http://nyti.ms/1ieO6jf)

- Major hotel chains are offering a host of benefits to lure travelers to book with them directly which include offers like digital check-in, free meals and even the ability to choose a specific room, a move aimed at encouraging guests to book directly and battle competition from online sites like Expedia Inc, Travelocity, Orbitz Worldwide Inc and Priceline Group. (http://nyti.ms/1EtLl7t)

- Japan's first commercial airliner in half a century - the Mitsubishi Regional Jet - will take its first test flight in October. The jet aims to break into the regional market dominated by Embraer of Brazil and Bombardier of Canada and is a major test of the capacity of Japan's aerospace industry to find customers beyond its borders. (http://nyti.ms/1KomBAn)

- For years, Republicans have run for office on promises of cutting taxes and bolstering business. But this election cycle, some influential party figures worry that Donald Trump's suggestions that he would raise taxes in certain areas could catch on with rivals in the presidential race. (http://nyti.ms/1JyvROL)

- In the last two months alone, the Obama administration has introduced a series of regulatory changes. Among them, a rule that would make millions more Americans eligible for extra overtime pay, and guidelines suggesting that many employers are misclassifying workers as contractors and therefore depriving them of basic workplace protections. This is part of an aggressive campaign to restore protections for workers that have been eroded by business activism. (http://nyti.ms/1ieNRER)

Hong Kong

SOUTH CHINA MORNING POST

- More than six in 10 employees in Hong Kong are unhappy at work and almost half said they intended to change jobs in the next 12 months, according to a survey carried out by a job-seeking website. JobsDB.com found salary was the secondary factor to happiness in the workplace, behind relationships with colleagues and bosses. (bit.ly/1Jt9EiV)

- All retail banks in Hong Kong have set up hotlines for customers to verify the identities of their employees in a bid to battle a flood of phone scam cases. Banking chiefs said the hotlines would be available through the websites of the Hong Kong Monetary Authority and Hong Kong Association of Banks. (bit.ly/1hsRjuX)

- Shrugging off investors' concerns over its debt level, Evergrande Real Estate Group vowed to maintain a 30 percent annual growth rate in the coming years despite a dwindling housing demand. Chairman Hui Ka-yan said the company would sell off retail stores and car parks worth more than 100 billion yuan ($15.68 billion) to reduce debt. (bit.ly/1JI3Wgs)

THE STANDARD

- The Hong Kong Retail Management Association has warned of layoffs in the fourth quarter as retail sales continue to contract amid dwindling visitor numbers, with a worse-than-estimated 2.8 percent drop in July from a year ago. (bit.ly/1JI3q28)

- Hong Kong dollar deposits fell 0.8 percent in July from June to HK$5.30 trillion ($684 billion), the Hong Kong Monetary Authority said. Yuan deposits rose 0.11 percent to 994.1 billion yuan ($156 billion), marking the slowest growth in four months. George Leung, Hong Kong Association of Banks acting chairperson, said a weaker yuan could shrink the city's capital pool but also fuel yuan loan demand. (bit.ly/1FdPLuj)

- Macau's economy shrank by more than 26 percent in the second quarter, the sharpest contraction since 2011, as Beijing's anti-corruption drive continued to hammer its gaming business. The city saw its gross domestic product tumble by 26.4 percent in the three months to June, down for four straight quarters. Its economy shrank by 25.4 percent in the first half. (bit.ly/1LPnQbI)

HONG KONG ECONOMIC JOURNAL

- China Properties Investment Holdings Ltd's shares plunged 82 percent, wiping off HK$4.4 billion from marekt value, before trading was halted later on Monday morning. Mainland train maker CRRC Corporation said in the evening that it had terminated its plan to buy a stake in China Properties as certain condition set out in the subscription agreement had not been satisfied.

- Chinese shampoo maker BaWang International (Group) Holding said its loss attributable to owners of the company widened to 88.1 million yuan ($13.8 million) for six months ended in June, from 51.6 million yuan the same period last year.

HONG KONG ECONOMIC TIMES

- Shanghai Industrial Holdings Ltd posted a 29.5 percent fall in first-half profit at 1.37 billion yuan ($215 million). Its executive chairman Wang Wei said the mainland property market had showed sign of improvement in the past few months and he was confident that the company would achieve its annual sales target of 8 billion yuan.

Britain

The Times

Retail investors in the embattled Co-operative Bank will have a rare opportunity to buy and sell shares through a private share auction next week. Hundreds of private investors who are estimated to own between 5 percent and 15 percent and who remain shareholders after the 1.5 billion pounds ($2.30 billion)restructuring at the end of 2013 are being invited to take part in the auction by Asset Match.(http://thetim.es/1N5MzZD)

The 6.5 million customers of Royal Bank of Scotland, NatWest and Ulster Bank were faced with more banking troubles yesterday after yet another IT glitch hit the group. For an hour in the morning customers found that they were either unable to log on to online banking, or even if they could, they were not able to make payments or transfer any money to other accounts. (http://thetim.es/1N5MANf)

The Guardian

Pfizer, one of the world's largest pharmaceutical groups, has said it will resist demands from investors and transparency campaigners that it disclose results from all historical drug trials. (http://bit.ly/1N5Mjdk)

Employers who fail to pay the new "national living wage" face increased fines under a crackdown on non-compliance announced by British Prime Minister David Cameron. Cameron said the new pay policy would only work if it were "properly enforced" and that the government would be funding a new unit to crack down on firms thought to be flouting the law. (http://bit.ly/1N5MncX)

The Telegraph

The French economy minister has called for the appointment of a powerful new "Euro Commissioner" to head a single economic government for the eurozone. Emmanuel Macron said it was time to "re-found the EU" and called for full fiscal union. (http://bit.ly/1N5MHbA)

Sky News

OneWeb, the satellite venture whose investors include Virgin Group and Coca-Cola is preparing to raise up to $2.5 billion. OneWeb is to hold an investment bank beauty parade ahead of fundraising planned for next year. (http://bit.ly/1N5LWPM)

A "supergiant" natural gas field which could supply Egypt for "decades" has been discovered off Egypt's coast. Italian oil company ENI said the find was the largest in the Mediterranean Sea and could yet become one of the world's most significant, possibly holding up to 30 trillion cubic feet of gas. (http://bit.ly/1N5MrcG)

• European stocks up, oil slides as concerns ease over Russia-Turkey tension (Reuters)
• ECB discusses two-tiered bank charges, broader bond buys (Reuters)
• Skies Darken for Accord on Syria With Turkish Downing of Russian Fighter (WSJ)
• New agonies, alliances as Fed debates post-liftoff plan (Reuters)
• Introducing the New OPEC Member That Likes Lower Oil Prices (BBG)
• A New Military Power Rises in the Mideast, Courtesy of One Man (BBG)
• Russia's Gazprom says halts gas supplies to Ukraine over payment (Reuters)
• Ex-Goldman Compliance Worker Sued by SEC for Insider Trading (BBG)
• Other central banks set to act, but Swiss policy cupboard bare (Reuters)
• The Many Steps in a Syrian Refugee’s Journey to the U.S. (WSJ)
• BTG Pactual CEO Esteves Arrested In Brazil's Graft Probe, Police Say (BBG)
• If China Killed Commodity Super Cycle, Fed Is About to Bury It (BBG)
• HP Inc. Gives Weak Earnings Forecasts (WSJ)
• Swedish central bank calls for action as Nordic property market fears grow (Reuters)
• For Poor Countries, Well-Worn Path to Development Turns Rocky (WSJ)
• Canada refugee plan revives concerns over porous U.S. border (Reuters)
• Elite funds prepare for reflation and a bloodbath for bonds (Telegraph)
• Three Goldman bankers leave for Uber as tech world raids Wall Street talent (Reuters)

Overnight Media Wrap

WSJ

- For a decade, Takata Corp employees in the U.S. raised concerns internally about misleading testing reports on air bags that later became prone to explosions, according to documents reviewed by Wall Street Journal. (http://on.wsj.com/1OfGx8R)

- When federal regulators launched a crackdown on alleged discrimination in auto lending two years ago, they calculated they could secure a market-shaping settlement by going after a company unlikely to fight the charges because it needed to avoid a complaint to clinch government approval for a broader restructuring, according to a report, based on internal documents and emails written by the staff of Consumer Financial Protection Bureau. (http://on.wsj.com/1OfGFoU)

- A U.S. investigation into potential foreign bribery by Wal-Mart Stores Inc has unearthed evidence of possible misconduct by the retailer in Brazil, after investigators found little to support the sweeping allegations involving Mexico that initially prompted the probe, according to documents and people familiar with the matter. (http://on.wsj.com/1OfGMkm)

- The U.S. Justice Department is investigating whether Comcast Corp's business practices in the $5 billion cable advertising-sales market violate federal antitrust law, according to a document reviewed by Wall Street Journal. (http://on.wsj.com/1OfGU3i)

- The California Public Employees' Retirement System, known as Calpers, said it has paid $3.4 billion in performance fees to private-equity managers since 1990, providing the most significant disclosure yet in a debate at retirement plans over whether Wall Street is worth the price of admission. (http://on.wsj.com/1OfH5vx)

FT

German prosecutors have launched an investigation into suspected tax evasion in connection with cheating on emissions tests by Volkswagen, adding to the intense scrutiny of Europe's biggest carmaker.

The European Commission proposed on Tuesday, a 45 billion stg eurozone-wide deposit guarantee scheme, that would guarantee all bank accounts up to 100,000 euros within the decade.

Former chief executive of BP Plc and ex-chairman of Royal Dutch Shell Plc said in a report that oil and gas companies need to adopt strategies such as shifting to renewable energy technologies and cutting further investment in fossil fuels to survive the global pressure to cut the use of fossil fuels.

NYT

- The American economy turned in a better performance last quarter than first thought, expanding at a 2.1 percent rate, the government said on Tuesday. The improvement in inventory levels was offset by a slight downward revision in consumer spending last quarter. (http://nyti.ms/1kRsTxp)

- Turing Pharmaceuticals, which sparked a fury two months ago by sharply increasing the price of a 62-year-old drug, said on Tuesday it would not reduce the list price of that drug after all. However, it said it would offer discounts of up to 50 percent to hospitals and would take other measures to help patients afford the medicine. (http://nyti.ms/1YteENE)

- The Food and Drug Administration said it had approved Portrazza from Eli Lilly, in combination with two forms of chemotherapy, to treat patients with advanced squamous nonsmall cell lung cancer, the most common type of lung cancer. (http://nyti.ms/1kSItZG)

- On Tuesday, California Public Employees' Retirement System disclosed for the first time that it paid $3.4 billion since 1990 to the biggest private equity managers on Wall Street, including firms such as Carlyle, Blackstone and Apollo. (http://nyti.ms/1PY6g5F)

- As early as 2000, the Japanese auto supplier Takata manipulated test results on airbag inflaters, according to a person with direct knowledge of internal company documents. The data manipulation, whose details were first reported by The Wall Street Journal, involved tests intended to demonstrate compliance with automakers' design specifications, said the person, who was not authorized to speak. (http://nyti.ms/1YteWnu)

- Governor of New York Andrew Cuomo said on Tuesday that the state had come to an agreement to keep open an Alcoa plant on St. Lawrence River after promising the company nearly $70 million in state subsidies. The governor's announcement came after several weeks of negotiations between New York officials and Alcoa.(http://nyti.ms/1I9J4Am)

Canada

THE GLOBE AND MAIL

** Quebec's pension fund manager Caisse de depot et placement du Quebec's bold foray into the world of infrastructure development is hitting snags, with concerns being raised over the tendering process for transit projects. (http://bit.ly/1Og2p3Z)

** Mortgage rates are on the rise in Canada, a trend that could cool the housing market even as the economy struggles to recover from the effects of low oil prices. Five-year, fixed-rate mortgages, which represent the largest share of Canadian mortgages, have risen by as much as 20 basis points in the past two months as Canadian government bond yields have moved higher. (http://bit.ly/1Og2Eff)

** Justin Trudeau's government will miss its self-imposed deadline to fulfill a signature campaign promise on Syrian refugees, as the Liberals announced a slower approach on Tuesday to bringing 25,000 government-assisted refugees to Canada. (http://bit.ly/1Og2Viu)

NATIONAL POST

** This Black Friday, the Outlet Collection at Niagara on the Ontario side of the border will be packed with more than a few U.S. license plates. Americans looking to take advantage of the favorable exchange rate have been heading north, and the expectation is that it will continue as long as the loonie is low, says Carley Rupcic, the tourism manager for the 720,000 square foot mall owned by Ivanhoe Cambridge, a real estate company. (http://bit.ly/1Lz0GAm)

** Bombardier Inc asked investors for a little more patience on Tuesday, acknowledging that 2016 will be another "difficult year" while outlining plans for a significant turnaround by 2020. (http://bit.ly/1Lz0MIf)

Hong Kong

SOUTH CHINA MORNING POST

- Some Hong Kong businesses are still not ready for a competition law which will come into force on December 14, an antitrust lawyer said. John Hickin, a partner of Mayer Brown JSM, said some businesses engaged in clearly cartel-type activities that have done nothing. The new Competition Ordinance will prohibit unfair business practices such as price fixing. (http://bit.ly/1YsXkYY)

- Hong Kong's new young band of democratically elected politicians has been invited by Chief Executive Leung Chun-ying to join the advisory bodies, which help shape government policies. The move follows Sunday's district council elections that saw dozens of young candidates unseat veterans of the pan-democratic and pro-establishment camps. (http://bit.ly/1lgCZr9)

- Alibaba Health Information Technology, which recorded a wider interim net loss for six months to September-end, plans to expand its fledgling internet-based medical services network to meet growing demand for private healthcare operations in mainland China. Chief executive Wang Lei said pilot testing of its medical services network started in the interim period. (http://bit.ly/1LyjyQ4)

THE STANDARD

- The International Federation of Association Football has started probe into an incident where Hong Kong fans booed the national anthem at the home World Cup qualifying match against China. The Hong Kong Football Association received an official letter from Fifa about disciplinary investigation, and is asked to provide a report for the match at Mong Kok Stadium on November 17. (http://bit.ly/1I9r8Wk)

- Eight of 60 batches of clothing tested by Shanghai authorities have contained quality issues. The Shanghai municipal bureau of quality and technical supervision identified problems with eight batches of garments, some from popular brands. These included women's jeans from Gap, jeans from Japanese brand Uniqlo and H&M jackets. (http://bit.ly/1T1YerG)

- Mainland developers may see their share prices outperform the Hang Seng Index in the first half of next year, with total home sales hitting a historic high during 2016, Citibank said in a report. A quick rebound in home prices in second-tier cities and more government stimulus such as tax cuts are the two driving forces for the industry, Citibank added. (http://bit.ly/1Yt0wE5)

HONG KONG ECONOMIC JOURNAL

- Asset Management Association of China said it lost contact with 12 private equity funds in the mainland, including 9 in Beijing. The association said it could not get hold of the funds through their provided telephone numbers, e-mails and short messages.

- Luxury goods retailer Joyce Boutique Holdings posted HK$34.9 million ($4.5 million) loss for six months ended September, against a profit a year ago, amid fall-off in customer spending in Hong Kong and China, driving down sales performance of luxury retail market. Depreciation of the euro and yen against yuan led to an increase in overseas shopping and online shopping.

Britain

The Times

One of the biggest shareholders in Royal Dutch Shell Plc has thrown its weight behind the oil group's 43 billion stg takeover of BG Group Plc, despite mounting concerns about the impact of plunging oil prices on the commercial logic that underpins the deal. (http://thetim.es/1jiFTuf)

The Guardian

The new chief executive of Rolls-Royce Holdings Plc has warned that senior job losses will form part of 200 million stg in annual cost cuts. (http://bit.ly/1jiF2d1)

John McDonnell, the shadow chancellor, has accused George Osborne of putting Britain's health and security at risk with politically motivated deficit reduction plans that have left the economy in chaos. (http://bit.ly/1lIoXiP)

The Telegraph

The chairman of the Energy and Climate Change select committee said it would write to regulator Ofgem asking it to examine "potential abuses of the system" after concerns were raised about the high prices National Grid had to pay one generator, Calon Energy, to help keep the lights on across the UK at the start of November. (http://bit.ly/1OeRszu)

The Treasury has agreed to meet with Britain's challenger banks at least four times a year, as George Osborne attempts to defuse a row over financial taxes ahead of his Autumn Statement on Wednesday. (http://bit.ly/1P7f9ve)

Sky News

Whitehall is making plans for a Commons vote on George Osborne's welfare cap within a month, in the clearest sign that the Chancellor has missed his self-imposed welfare cap. (http://bit.ly/1OqViUr)

The rollercoaster crash at Alton Towers that seriously injured five people was caused by human error, the theme park has said. (http://bit.ly/1kSmMZK)

The Independent

The maker of Whirlpool, Indesit and Hotpoint tumble dryers has warned that a "significant" number of millions of dryers in households around the UK could pose a fire risk. (http://ind.pn/1MzDPZt)

Former California Public Employees' Retirement System (CalPERS) CEO Federico Buenrostro was sentenced Tuesday by a federal judge to four and a half years in prison for accepting more than $200,000 in bribes trying to steer investments.

Buenrostro pleaded guilty to fraud and bribery charges two years ago, saying he started taking bribes around 2005 to try and get CalPERS staff members to make investment decisions that helped Alfred Villalobos, an investment manager and former board member of the fund. The judge called the case "seriously troubling", and said it reflected a "spectacular breach of trust for the most venal of purposes, which is self-enrichment."

From the Los Angeles Times

A federal judge Tuesday sentenced the former head of the California Public Employees' Retirement System to 4 1/2 years in prison after the former chief executive acknowledged accepting more than $200,000 in bribes and trying to steer investments to help an associate.

 

Senior U.S. District Judge Charles Breyer called the case against Federico Buenrostro Jr., head of the nation's largest public pension fund, “seriously troubling” and said it reflected a “spectacular breach of trust for the most venal of purposes, which is self-enrichment.”

 

Buenrostro pleaded guilty to fraud and bribery charges two years ago, saying he started taking bribes around 2005 to try to get CalPERS staff members to make investment decisions that helped Alfred Villalobos, an investment manager and former board member of the pension fund.

 

Buenrostro said he accepted cash and a trip around the world and allowed Villalobos to pay for his wedding in Lake Tahoe. Villalobos killed himself last year, weeks before he was set to go on trial. He had pleaded not guilty to fraud charges.

 

“I take full responsibility and accept the consequences of the actions I took,” Buenrostro, in a blue jail outfit and leg irons, told the judge before he was sentenced. “I'm humiliated, embarrassed and deeply ashamed of my actions.”

The sentencing is the result of a years-long investigation into money management middlemen who helped clients win investment business from the fund which as about $290 billion in assets. Buenrostro faced up to five years in prison but the US attorney's office asked for a four year term, citing Buenrostro's cooperation.  As part of a plea deal, Buenrostro acknowledged giving Villalobos access to confidential investment information and forging letters that enabled firms connected with Villalobos to collect a $14 million commission on $3 billion worth of pension fund investments. The former CEO has also agreed to pay back $250,000 to the state.

"This was one of the most startling and serious cases of public corruption in the history of the state of California. That being said, Mr. Buenrostro did come forward and admit to what he had done." said Tim Lucey, representing the US attorney's office.

As far as Villalobos, after pleading not guilty to fraud, he took his own life just weeks before he was set to go on trial.

Sadly, this isn't something that members of CalPERS needed to experience. With the fund already severely underfunded as it is, learning that the CEO was crooked and diverted funds to investment managers due to bribes instead of performance and strategy is just kicking the members while they are down.

Funding ratio estimates for CalPERS