- Espirito Santo Financial Suspends Shares, Bonds on ESI Exposure (BBG)
- Europe Stocks Drop for Fifth Day as Espirito Santo Sinks (BBG)
- Espirito Santo Creditors Doubt Containment on Missed Payment (BBG)
- French Stocks Seen Extending Losses on Economy Concern (BBG)
- Stocks Slide With Portugal Bonds as Yen Gains; Oil Drops (BBG)
- U.S. Probes Hacking of Government Computers at Personnel Agency (WSJ)… finds terabytes of porn
- It’s Congress’ fault: Obama rejects criticism over border crisis (Reuters)
- Israel Mobilizes 20,000 Troops for Possible Gaza Invasion (BBG)
- Chinese hackers pursue key data on U.S. workers (NYT)
- Donetsk Primed for Siege as Ukraine Army Hems In Rebels (BBG)
- Regulators Ready Money-Fund Rules (WSJ)
- Are Investors Complacent About Risk? Concern Raised in June Fed Meeting (BBG)
- Gaza Rockets Threaten Nuclear Plant as Israel Vows Force (BBG)
- China June trade data misses forecasts, doubts over economy linger (Reuters)
Overnight Media Digest
* Federal Reserve officials agreed at June’s policy meeting to end their bond-buying program in October, putting an explicit end date on the experiment for the first time. Most officials at the June meeting also indicated that they expect an interest rate hike to come next year. (http://on.wsj.com/VLc1vo)
* IBM on Wednesday pledged to spend $3 billion over five years on semiconductor research. The money will be directed toward two major tasks: tackling technical obstacles to the miniaturization of circuitry on conventional silicon chips and developing alternative materials and technologies to keep boosting computing speed while consuming less energy. (http://on.wsj.com/1nffCfJ)
* The Education Department says it was unaware of the dire state of Corinthian Colleges Inc’s finances before it moved June 12 to restrict access to federal student-aid dollars, which made up 80 percent of Corinthian’s revenue. The aid freeze was designed to pressure the company to comply with an investigation into recruiting tactics, administration officials say, not to force its closure. (http://on.wsj.com/1szTnRZ)
* Chinese exports grew in June on the back of strengthening U.S. consumer demand, in a positive sign for China’s crucial factory sector and for the global outlook. The pace of export growth disappointed some economists, though others blamed the lingering impact of distortions in last year’s Chinese trade numbers used to make the comparison. (http://on.wsj.com/1ra3L2H)
* European Union antitrust officials have started questioning rival firms about Facebook Inc’s proposed $19 billion acquisition of messaging service WhatsApp, ahead of a formal review that could be a test case for how to apply EU competition law to the new world of social media. (http://on.wsj.com/1n7ifLz)
* U.S. regulators are poised to complete long-awaited rules intended to prevent a repeat of the investor stampede out of money-market mutual funds that threatened to freeze corporate lending during the 2008 financial crisis. The Securities and Exchange Commission is expected to vote on a plan as early as this month that would require certain money funds catering to large, institutional investors to abandon their fixed $1 share price and float in value like other mutual funds, these people said. (http://on.wsj.com/1ol2KkG)
AbbVie Chief Executive Richard Gonzalez was on Wednesday forced to retract comments made by him while discussing shareholder support for the U.S. drugmaker’ s 30 billion pound ($51.1 billion) bid for Shire after being caught out by British takeover rules.
Citigroup Inc is close to shelling out more than $7 billion to resolve a long-running investigation by the U.S. government into its sale of mortgage-backed securities, according to people familiar with the matter.
Germany’s Lufthansa may launch a no-frills long-haul airline as part of wider plans by the company to stave off competition from low-cost and Middle Eastern carriers.
European Union antitrust regulators fined have fined six drugmakers including France’s Servier a whopping 428 million euros ($583.8 million) for blocking the entry of cheaper generic competition to an expensive branded drug.
Britain’s financial watchdog is launching a review of competition in the wholesale securities market as it eyes the practices used by high-frequency traders to get ahead on other investors.
Germany’s Aldi is the global leader among discount food retailers that offer limited assortment grocery. Schwarz, which owns Lidl, took second place, according to a study by research firm Planet Retail.
A cross-selection of peer-to-peer (P2P) loans has gotten a credit rating from Standard & Poor’s, marking the first time that a major credit rating agency has agreed to formally evaluate a securitisation from the fast-growing P2P sector.
* With countries in the European Union obliged to reduce their debt as a percentage of their economies, the quantifying of vice is expected to make growth rates look rosier. (http://nyti.ms/1ol0Twa)
* Chinese hackers in March broke into the computer networks of the United States government agency that houses the personal information of all federal employees, according to senior American officials. They appeared to be targeting the files on tens of thousands of employees who have applied for top-secret security clearances. (http://nyti.ms/1mL8sRb)
* A growing category in health care promises an alternative to the hospital emergency room and perhaps the family practitioner, with low fees and extended hours. Once derided as “Doc in a Box” medicine, urgent care has mushroomed into an estimated $14.5 billion business. (http://nyti.ms/1mBdPAK)
* Europe’s top antitrust enforcer said several drug makers, including Servier, kept more affordable forms of a popular heart treatment off the market. (http://nyti.ms/1mBehix)
* The Taxi and Limousine Commission declared Lyft, a car-summoning start-up, an “unauthorized service” in New York City on Wednesday, two days before its planned debut. The start-up, however, did not come to an operation agreement with New York City regulators beforehand, prompting the commission’s action on Wednesday evening. (http://nyti.ms/1xVJoJD)
* In small trials, two drugs go far in soothing symptoms of Eczema and Psoriasis. An experimental drug for eczema relieved severity of symptoms in 85 percent of those who took it. A drug for psoriasis cut severity of symptoms in as many as 82 percent of those who took it. (http://nyti.ms/1mLqVgH)
* A merger of Comcast and Time Warner Cable and a joining of AT&T and DirecTV would both pose competitive threats, Dish said. (http://nyti.ms/1mLnQNn)
* Harley-Davidson is recalling 66,421 Touring and CVO Touring motorcycles from the 2014 model year because their front wheels can lock up without warning. The company said it knew of five crashes and two minor injuries related to the defect, which it discovered last fall through warranty claims.(http://nyti.ms/TU7QMr)
THE GLOBE AND MAIL
** Heavy rain is not the only reason the Assiniboine River is flooding in the height of summer and threatening a swath of communities across southern Manitoba this week, a new report suggests. The elimination of vast numbers of small ponds and wetlands across the Canadian prairie has removed a crucial buffer that can temporarily store water on the landscape during periods of excessive precipitation. (http://bit.ly/1rawNiP)
** Canada should “come off the sidelines” to take a more active role in South Sudan as that country’s humanitarian crisis deepens, the head of Amnesty International’s Canadian branch says. Alex Neve made the comments after a 10-day visit to South Sudan, where a violent conflict is causing widespread upheaval in the world’s newest country. (http://bit.ly/1ngOQU2)
Reports in the business section:
** Multimillionaire geologist Charles “Chuck” Fipke has sold his remaining stake in Ekati, the first-ever Canadian diamond mine he discovered two decades ago in the Arctic tundra of the Northwest Territories. The native Albertan sold his 10 percent interest to Dominion Diamond Corp for a total of $67 million (http://bit.ly/1nad8KL)
** A father opened fire at a suburban Houston home Wednesday, killing four of his children as well as two adults who were with them, and critically wounding his 15-year-old daughter, authorities said. The suspected gunman eventually surrendered after a three-hour standoff with deputies who had cornered him. (http://bit.ly/1rayexz)
** The Conservative government is examining a whole new business model to effectively buy, sell and use the time and skills of federal employees: Meet the BURO-crat. The government has been planning a pilot project at some federal agencies that would apply “market principles” to more efficiently use federal bureaucrats and help smooth out busy and slow work periods, according to government records. (http://bit.ly/W05QUP)
** The Canadian arm of China Petrochemical Corp may shelve work on its Northern Lights oil sands lease or sell the property entirely, as Chinese companies begin to rethink future investment prospects in the world’s No. 3 crude reserve. Sinopec, as the company is known, could delay efforts to develop the property or seek to sell its interest in the lease entirely as it consolidates its North American assets, a person familiar with board-level discussions in Beijing said. (http://bit.ly/U5bLX7)
** CNOOC Ltd subsidiary Nexen Energy ULC is restructuring its operations and letting go staff despite pledges to Ottawa by China’s largest offshore oil producer to keep all employees and senior management and turn the Calgary-based company into a platform for growth, industry sources say. (http://bit.ly/1tquxZ3)
CHINA SECURITIES JOURNAL
Qianhai, the special economic zone in China’s southern city of Shenzhen, plans to publish new rules that will expedite investment by Hong Kong companies and accelerate financial cooperation between the two neighbouring cities.
SHANGHAI SECURITIES NEWS
China has vowed to improve insurance services to stimulate innovation in social governance, the State Council said in a statement on Wednesday. Competent insurers are encouraged to roll out commercial pension and health care plans, invest in the pension sector, participate in the integration of the health sector and develop new products. Insurance will be incorporated into the disaster prevention system and funds will be encouraged to invest in urbanization, infrastructure and residential renovations.
21st CENTURY BUSINESS HERALD
– A residential land parcel in downtown Shanghai was sold at a record price of nearly 60,000 yuan per square metre, making it the most expensive plot sold in the country so far this year. The 6.885-square metre plot was acquired by a subsidiary of Lai Fung Holdings Ltd, which is the property and investment arm of the Lai Sun Group.
– China’s chief climate official, Xie Zhenhua, said the nation should not be subject to the same rules for greenhouse gas emissions as the U.S. and other developed countries, and that Beijing will oppose attempts to impose them on China at next year’s world climate conference.
– Bank of China on Wednesday denied helping to launder money for people planning to emigrate by ignoring the annual cap on foreign exchange for individuals. According to a report by broadcaster CCTV, the country’s largest foreign exchange bank has frequently allowed wealthy customers to transfer as much money as they want overseas.
CABLE HIRES MYNERS TO DEFUSE FLOAT ANGER
Vince Cable has attempted to head off what will be an excoriating attack on him by MPs later this week over the sale of Royal Mail by calling in a former Labour City minister to head an inquiry into government privatisations.
APPLAUSE FILLS AISLES AS KING CHECKS OUT
In the end there was no valedictory, no finger pointing and no barracking from the floor. Justin King stood down as the chief executive of J Sainsbury after ten years and fifteen weeks yesterday with the sound of applause ringing in his ears.
INSURERS PROMISE TO BE MORE OPEN WITH CUSTOMERS ON COSTS
Motorists and householders renewing their annual insurance policies could be told at the same time what their cost of cover was the previous year under an industry drive to be more open with customers.
BANK OF ENGLAND’S NEMAT SHAFIK SIGNALS THAT INTEREST RATE RISE EDGES CLOSER
The Bank of England’s new deputy governor has signalled that an interest rate rise is edging closer after telling MPs the amount of spare capacity in the economy is lower than the bank predicted in May.
MONTHLY HOUSE PRICES FOR JUNE DROP 0.6 PCT, HALIFAX REPORTS
House prices experienced a bigger monthly fall than analysts had expected in June, knocking 1,100 pounds ($1,900) off the average property value, according to a survey carried out by mortgage lender Halifax.
UBS PREDICTS SAVINGS FLIGHT FROM SCOTLAND IN THE EVENT OF ‘YES’ VOTE
Savers may rapidly move their money south of the border if Scotland were to vote for independence, analysts at one of Europe’s biggest banks have predicted.
QATAR CUTS HOLDING IN LONDON STOCK EXCHANGE BY A THIRD
Qatar Holding is to trim its 15 percent stake in the owner of the London Stock Exchange by a third ahead of a $1.6 billion rights issue by the British bourse to fund its acquisition of Russell Investments.
SHALE ‘COULD MEET 41 PCT OF UK’S GAS NEEDS’, SAYS NATIONAL GRID
Shale gas produced in the UK could provide more than a third of the nation’s gas supplies within 20 years, a report has found.
RAC OWNER CARLYLE HOLDS TALKS ABOUT 2 BLN STG SALE
The owners of the RAC roadside recovery service have been holding secret talks about a 2 billion pound sale in the wake of a modest stock market debut by the AA, its main rival.
SYRIA ‘LIKELY’ USED UK CHEMICALS TO MAKE SARIN
Chemicals exported by British firms to Syria in the 1980s are likely to have been used to make the nerve agent sarin, UK Foreign Secretary William Hague said.
Fly On The Wall 7:00 AM Market Snapshot
Domestic economic reports scheduled for today include:
Jobless claims for week of July 5 at 8:30–consensus 315K
Wholesale trade inventories for May at 10:00–consensus up 0.6%
Alcoa (AA) upgraded to Overweight from Equal Weight at Morgan Stanley
Allscripts (MDRX) upgraded to Strong Buy from Buy at ISI Group
Autodesk (ADSK) assumed with an Overweight from Equal Weight at Barclays
CommonWealth REIT (CWH) upgraded to Buy from Hold at Stifel
MB Financial (MBFI) upgraded to Buy from Neutral at Sterne Agee
MRC Global (MRC) upgraded to Neutral from Underperform at BofA/Merrill
PrivateBancorp (PVTB) upgraded to Buy from Neutral at Sterne Agee
Starwood (HOT) upgraded to Buy from Hold at MLV & Co.
TCF Financial (TCB) upgraded to Buy from Neutral at Sterne Agee
Tractor Supply (TSCO) upgraded to Outperform from Neutral at Credit Suisse
Lumber Liquidators (LL) downgraded to Hold from Buy at Jefferies
Lumber Liquidators (LL) downgraded to Neutral from Outperform at Credit Suisse
T. Rowe Price (TROW) downgraded to Equal-Weight from Overweight at Evercore
UnitedHealth (UNH) downgraded to Hold from Buy at Jefferies
Waddell & Reed (WDR) downgraded to Neutral from Buy at Citigroup
American Express (AXP) initiated with an Underperform at Macquarie
Aon plc (AON) initiated with an Overweight at Evercore
Associated Banc-Corp (ASBC) assumed with a Neutral at Sterne Agee
CIT Group (CIT) initiated with an Underperform at Macquarie
Cepheid (CPHD) initiated with an Outperform at Wells Fargo
Discover (DFS) initiated with an Outperform at Macquarie
EZCORP (EZPW) initiated with a Neutral at Macquarie
Envision Healthcare (EVHC) initiated with an Outperform at RW Baird
Exterran Partners (EXLP) initiated with a Neutral at Goldman
FirstMerit (FMER) initiated with a Neutral at Sterne Agee
Foresight Energy (FELP) initiated with an Outperform at Cowen
Freeport McMoRan (FCX) initiated with an Overweight at HSBC
MDU Resources (MDU) initiated with a Market Perform at Wells Fargo
Marsh & McLennan (MMC) initiated with an Overweight at Evercore
Model N (MODN) initiated with an Outperform at Northland
Nexstar (NXST) initiated with a Hold at Noble Financial
NorthStar Asset Management (NSAM) initiated with an Outperform at FBR Capital
QIAGEN (QGEN) initiated with a Market Perform at Wells Fargo
Quidel (QDEL) initiated with a Market Perform at Wells Fargo
Santander Consumer (SC) initiated with a Neutral at Macquarie
ServiceNow (NOW) initiated with a Neutral at BofA/Merrill
Springleaf (LEAF) initiated with a Neutral at Macquarie
TAL International (TAL) initiated with a Neutral at Macquarie
Team Health (TMH) initiated with an Outperform at RW Baird
Textainer (TGH) initiated with a Neutral at Macquarie
Trovagene (TROV) initiated with a Buy at Maxim
Willis Group (WSH) initiated with an Equal-Weight at Evercore
World Acceptance (WRLD) initiated with a Neutral at Macquarie
Boeing (BA) projected demand for 36,770 new airplanes over the next 20 years valued at $5.2T
IBM (IBM) announced a $3B cloud, big data systems research initiative
Harley-Davidson (HOG) recalled 66,421 motorcycles due to potential wheel lock-up
Google Ventures (GOOG) said it would launch a new venture fund in Europe with initial funding of $100M
Costco (COST) reported June SSS up 6%
Zynga (ZNGA) appointed Google (GOOG) executive Dr. Regina Dugan to the company’s board
Regado Biosciences (RGDO) said the FDA placed a clinical hold on the company’s ongoing Phase 3 REGULATE-PCI trial
Worldwide PC shipments totaled 75.8M units in Q2, a 0.1% increase from 2Q13. According to IDC’s Worldwide Quarterly PC Tracker, worldwide PC shipments totaled 74.4M units in Q2 (HPQ, TOSBF, AAPL, MSFT, IBM)
Companies that beat consensus earnings expectations last night and today include:
DragonWave (DRWI), CHC Group (HELI)
Companies that missed consensus earnings expectations include:
Helen of Troy (HELE), WD-40 (WDFC)
Lumber Liquidators (LL) sees Q2 EPS 59c-61c, may not compare to consensus 90c
Lumber Liquidators (LL) lowers FY14 EPS view to $2.65-$3.00 from $3.25-$3.60
DragonWave (DRWI) sees Q2 revenue growth 25%-40% relative to Q1
Ventas (VTR) sees Q2 normalized FFO at least $1.09, consensus $1.09
Helen of Troy (HELE) backs 2015 adjusted EPS view $4.30-$4.40, consensus $4.38
Zumiez (ZUMZ) raises Q2 EPS, revenue outlook
HP (HPQ) sources deny bid made for Rackspace (RAX), Re/code reports
Holder refuses meeting with BofA (BAC) CEO, Reuters says
News Corp’s (NWSA) HarperCollins selling books directly to readers to bypass Amazon (AMZN), FT reports
Shareholders urge Allergan (AGN) to make large acquisition, FT reports
Bank of America (BAC) requests 5c dividend reapproval, WSJ reports
Commerzbank (CRZBD) could resolve U.S. probe by paying $600M-$800M, Reuters says
Investigation into ousted American Apparel (APP) CEO to end soon, Reuters reports
Schlumberger (SLB) can continue higher, Barron’s says
Crestwood Equity (CEQP) files to sell 26.3M common units for holders
Eros International (EROS) 7M share Secondary priced at $14.50
Kosmos (KOS) files to sell 17M shares of common stock
Malibu Boats (MBUU) 4.8M share Secondary priced at $18.50
Memorial Production (MEMP) files to sell 8.6M common units for partners
Ocera Therapeutics (OCRX) files to sell common stock
Sotherly Hotels (SOHO) announces $23.4M ‘at-the-market’ equity offering