ZeroHedge – Frontrunning – 22 July 2014

  • ZeroHedgeEU Works to Punish Russia as MH17 Bodies Leave Rebel Area (BBG)
  • Bodies From Malaysia Airlines Flight Begin Long Trip to Netherlands (WSJ)
  • Israel pounds Gaza as Kerry arrives (Reuters)
  • U.S. judge dismisses Republican lawsuit over Obamacare subsidy for Congress (Reuters)
  • Israel Soldier Missing Amid Assault on Hamas in Gaza (WSJ)
  • Detroit Retirees Vote in Favor of Pension Cuts (WSJ)
  • Russia Axes 1st Bond Sale in 3 Months as Ukraine Drives Up Yield  (BBG)
  • Wall Street Cut From Guest List for Jackson Hole Fed Meeting (BBG)
  • Credit Suisse to Exit Commodities, Posts Big Quarter Loss (BBG)
  • Draghi Cedes Euro Control to Yellen on Fed Rate Wagers (BBG)
  • Turkish Businesses Boycotting Israeli Products Because of Gaza (INN)
  • Soros Chart Shows Euro-Yen Reaching 2008 High (BBG)
  • Next iPhone Will Offer Bigger Screens; Apple Tells Suppliers to Gear Up for 4.7-inch and 5.5-Inch Screen Sizes (WSJ)
  • Sterling Trust Could Face Default on Loans if Clippers Aren’t Sold, CFO Says (WSJ)
  • Saudi to Open Up $531 Billion Stock Market to Foreigners (BBG)


Overnight Media Digest


* Separatists in Ukraine released the bodies of victims in the downing of Malaysia Airlines Flight 17 and agreed to hand over the aircraft’s data recorders, allowing the focus to tighten on establishing who brought the jetliner down. (

* Workers and retirees approved pension cuts in Detroit’s bankruptcy, the city said Monday, a crucial step to emerging from the largest municipal insolvency in U.S. history. The city disclosed results from two months of balloting, which ended July 11. (

* European ministers are expected to approve sanctions that will target Russian oligarchs in response to the suspected downing of a Malaysian jetliner by Moscow-backed rebels in eastern Ukraine. (

* Apple Inc is preparing for its largest initial production run of iPhones this year, betting that larger-screen models will lure consumers now attracted to similar phones from Samsung Electronics Co. The company is asking suppliers to manufacture between 70 million and 80 million units, larger than the initial order last year of 50 million to 60 million versions of the iPhone 5S and 5C. (

* The U.S. owner of a meat supplier in Shanghai apologized and promised a swift response after McDonald’s Corp and Yum Brands Inc suspended purchases in China in the wake of allegations it sold expired chicken and beef to restaurants. China’s Food and Drug Administration halted on all business activities of Shanghai Husi and launched a nationwide investigation of the company. (

* Washington’s regulatory machine is altering Wall Street in fundamental ways, four years after the Dodd-Frank financial law became reality. Banks are selling off profitable business lines, pulling back from the short-term funding market, cutting ties with businesses that could attract extra regulatory scrutiny, and building up defenses to help weather future crises. (

* Spending on mobile ads is expected to jump 83 percent this year, but given how much time Americans spend on their devices, mobile-ad spending could be much higher. (

* The family trust that owns the Los Angeles Clippers is in danger of defaulting on loans if a planned sale of the NBA team doesn’t go through, an executive testified Monday. (

* Allergan, which is trying to avoid being acquired by Valeant Pharmaceuticals International Inc, said it would cut 13 percent of its work force and reduce drug research, to boost its profits over the next six years. Valeant also had similar plans of restructuring, if it acquired Allergan. (

* Netflix Inc said its second quarter earnings more than doubled as it added 1.7 million subscribers world-wide but cautioned that a more aggressive international expansion would hurt profits in third quarter. (

* Venezuela’s auto industry, once the third largest in South America, is seizing up as manufacturers struggle to produce a few vehicles a day. Car makers like Ford Motor Co, Fiat Chrysler Automobiles, General Motors and Toyota Motor Corp, have cut output by more than 80 percent in the first six months of the year, due to lack of dollars to pay part suppliers. (

* Activist investor Jana Partners LLC has built a stake worth more than $1 billion in Apache Corp and is calling on the oil and gas producer to sell off its international holdings to drill exclusively on American soil. It also wants the company to exit some projects to free up cash flow. (

* Crocs is trimming jobs and reducing the number of stores as the maker of colorful plastic clogs said it needs to get smaller to improve profitability. (



Time Warner Cable Inc, which owns cable networks TNT and CNN, scrapped a rule that allows investors to call a shareholder meeting in a bid to block a potential hostile takeover by Rupert Murdoch’s Twenty-First Century Fox.

Portugal’s largest-listed lender, Banco Espirito Santo is to appoint a special financial adviser to help improve its balance sheet days after one of its holding companies filed for creditor protection.

Barclays Plc U.S. dark pool slips from second to 12th place in terms of volumes traded as customers flee following a lawsuit that alleged the lender misled clients about frequency activity in its private trading venue.

China’s MMG Ltd shareholders approve purchase of the Las Bambas copper project in Peru from Glencore Plc for $5.85 billion.

British engineering contractor Babcock International’s order book for the coming year rose to 13.5 billion pounds ($23.1 billion), helped by recent contract wins and its acquisition of helicopter transport firm Avincis.



* Netflix Inc reported its business grew in the second quarter thanks to international customers and little adverse effect from an announced price increase. The company said it surpassed 50 million total members for its streaming service, including free trial memberships, in the second quarter of this year. Netflix has announced plans to introduce its service to a number of European markets in September, including Austria, Belgium, France, Germany, Luxembourg and Switzerland. (

* In response to an article about the political connections of some of its shareholders, Alibaba Group Holding Ltd <IPO-BABA.N> discounted the notion that their backgrounds helped drive its business. In a strongly worded statement on Monday in Chinese on its account on Weibo, a Twitter-like social media network, Alibaba said The Times article “mistakenly described” Alibaba’s relationship with the investors. (

* Yahoo Inc announced Monday that it had agreed to acquire Flurry, a mobile ad and analytics company. Flurry’s advertising expertise could help Yahoo as it tries to build a meaningful mobile ad business. Although more than half of Yahoo’s monthly audience visits come on mobile devices, revenue from mobile ads is still so small that the company does not break it out. (

* Time Warner Inc on Monday amended its corporate bylaws and removed a provision that allowed shareholders to call a special board meeting. In a filing with the Securities and Exchange Commission, Time Warner said the change was effective immediately. Without the ability to call a special meeting, shareholders supportive of a Twenty-First Century Fox offer would not be able to replace Time Warner’s board of directors before the company’s next annual meeting, which would likely come next June. (

* Malaysia Airlines’ two crashes in less than five months are sending tremors through the aviation insurance market – not least because the carrier’s $2.25 billion overall liability policy is mysteriously missing a standard clause that usually limits insurers’ payments for search-and-rescue costs. (

* A Senate investigation has found that hedge funds – in particular, James Simons’ Renaissance Technologies – used complex financial structures to claim billions of dollars in tax savings. Between 1998 and 2013, more than a dozen hedge funds conducted hundreds of billions of dollars in trades using hundreds of structures, known as “basket options,” created by Barclays Plc and Deutsche Bank AG, the Senate Permanent Subcommittee on Investigations said in a report on Monday. (

* Goodwill Industries International, a nonprofit agency that operates thrift stores around the country, said on Monday that it was investigating a potential security breach that may have led to the theft of customers’ credit card data. (

* Hedge funds are not new to farmland. For nearly a decade they have scoured the corners of the globe for cheap land as food prices have soared, positioning themselves to profit from the growing demand. Hedge funds now have $14 billion invested in farmland, according to the data provider Preqin. With its steady income stream, farmland is proving to be a ripe offering for sophisticated investors. (




* A Chinese man accused of being the “directing mind” behind a corporate-espionage conspiracy to steal jet-fighter secrets from Pentagon contractors is a Canadian immigrant who is being stripped of his residency status. (

* The mysterious shooting death of a respected Florida law professor originally from Toronto took a sinister turn on Monday as investigators revealed that Dan Markel was the victim of a targeted attack. (

Reports in the business section:

* Mark Brock has been growing corn near London, Ontario, for decades but he has never seen a market quite like this with prices plummeting so fast he may not even try to sell some of his crop this year. Like many farmers, Brock has been trying to protect his profits by forward selling as much of his corn as possible. (


* The New Democratic Party is vigorously defending allegations it improperly put parliamentary staff in so-called satellite offices in Quebec before a meeting by the House of Commons panel that monitors spending by members of parliament. (

* Senator Mike Duffy allegedly charged the Senate for personal travel to funerals, and disbursed money to three people for illegitimate expenses under the guise of a consulting contract. The allegations are contained in newly released court documents. The documents were made public on Monday, several days after the Royal Canadian Mounted Police announced that it was charging the suspended senator with 31 criminal counts. (


* Rogers Publishing announced a small shakeup to its magazine mastheads on Tuesday, with three top editors cut loose, as part of an effort to streamline its editorial structure. According to an internal staff memo, the position of editor-at-large, held by Dianne de Fenoyl, would be eliminated, and de Fenoyl would be leaving after nearly a decade with the company. (

* Fashion industry veteran Mario Grauso has been promoted to president of Loblaw Companies Ltd’s in-house apparel brand Joe Fresh. The move comes as part of a major management shuffle at the country’s biggest grocery chain last week, which saw Galen Weston named president of the retailer and the exit of president Vicente Trius. (




– New residential property sales remained sluggish in Shanghai, staying below the 150,000-sq. m. threshold for the second straight week. In the nearby city of Hangzhou, home buyers remain reluctant to buy property even though housing prices have started to fall, as they expect prices to decline further.


– China Mobile Ltd, the world’s No. 1 telecom carrier by subscriber numbers, said on Monday it was removing its premium customer lounges at the nation’s airports in a bid to cut back on operating expenses. The firms also plans to close down the majority of its customer clubs, a type of value-added service introduced a few years ago to lure new subscribers.

– China’s railway track should total more than 200,000 km by 2030, in line with the nation’s economic goals, and at least 10 percent of it will be for high-speed rail, the former chairman of China South Locomotive and Rolling Stock Co Ltd, and an adviser to the China Institute for Innovation and Development Strategy, said. China had 103,144 km of track, including 11,028 km for high-speed rail, the longest in the world.


– China Financial Futures Exchange Board Chairman Zhang Shenfeng wrote an article advocating further reform and technical improvements to the market interest rate system.


Hong Kong


— Hong Kong does not need a controversial HK$30 billion ($3.87 billion) upgrade of its centralised wastewater treatment system as the water in the harbour is clean enough, at least for now, the city’s environment officials say. (

— The chief executive of the Hong Kong Monetary Authority, Norman Chan Tak-lam, defended the city’s strict banking rules as some of the best in the world, amid a flurry of recent international concern over the territory’s banking system. (


— Health and wellness products retailer OTO Holdings has been censured by the Hong Kong stock exchange for breaching the bourse’s listing rules of twice failing to timely disclose its weaker results, along with its executive directors neglecting their undertaking to the bourse. (

— Electronic books could soon turn a page to greater popularity in Hong Kong, says an e-book provider. Sino United Electronic Publishing content director Ivan Tsoi Yiu-ming said he is optimistic about e-books due to the popularity of tablet computers and smartphones. (

— Tissue paper firm Vinda International said net profit fell 21.8 percent in the first half to HK$222.18 ($28.66) million, from a year earlier, due to foreign exchange losses as the yuan weakened against the U.S. dollar. (


— Morgan Stanley has raised its stake in Wing Hang Bank to 5.03 percent from 4.84 percent, according to data from the Hong Kong stock exchange.


— HK Electric Investments Ltd posted a profit of HK$967 million ($124.75 million) for the first half of 2014 while distributable income amounted to HK$1.46 billion.


— The average monthly rental of Hong Kong’s 85 major residential developments stood at HK$23.2($2.99) per square foot in June, the highest monthly rental in 19 years, according to a report from property agent Centaline.


The Times


( Australian regulators have fined Royal Bank of Scotland nearly 900,000 pounds after the bank admitted its role in attempts to manipulate the country’s equivalent of the Libor benchmark borrowing rate.



The female chief executives of the telecoms company TalkTalk and the Yorkshire-based power plant Drax are among the new appointees to the board of the Bank of England, which was heavily criticised for having insufficient women in senior positions.

The Guardian



More than a dozen hedge funds, with assistance of Barclays and Deutsche Bank, used “dubious” financial products to claim billions in unjustified tax savings and circumvent rules meant to limit risky bets, a Senate subcommittee investigation has found.



MPs have called on the competition watchdog to force high street banks to improve standards and the way they treat their customers after the Competition and Markets Authority signalled it would investigate the industry.

The Telegraph



The president of Portugal has warned that the financial crisis gripping the Espirito Santo family could affect the country’s economy.



Germany’s current account surplus is the largest ever recorded in proportional terms and far above the threshold for EU sanctions, posing a major political test for the incoming commission of Jean-Claude Juncker.

Sky News



The family-owned business behind Glenfiddich and Grant’s is examining a 100 million pound takeover of Drambuie, the liqueur reputed to be made from a recipe concocted by Bonnie Prince Charlie.



The banking industry’s main lobbying group, British Bankers’ Association, is considering proposals to merge with at least two of its peers amid pressure from leading members to reduce costs levied by trade organisations.


Fly On The Wall Pre-Market Buzz



Allergan (AGN) upgraded to Buy from Neutral at UBS
American Axle (AXL) upgraded to Neutral from Underweight at JPMorgan
Diamondback Energy (FANG) upgraded to Buy from Neutral at Roth Capital
Digital Realty (DLR) upgraded to Buy from Hold at Deutsche Bank
Five Below (FIVE) upgraded to Outperform from Market Perform at Wells Fargo
Gas Natural (EGAS) upgraded to Buy from Hold at Wunderlich
Hasbro (HAS) upgraded to Overweight from Equal Weight at Barclays
Huntington Bancshares (HBAN) upgraded to Outperform at Keefe Bruyette
Realogy (RLGY) upgraded to Buy from Neutral at Citigroup
Sanmina (SANM) upgraded to Hold from Sell at Deutsche Bank
Trex Company (TREX) upgraded to Buy from Hold at Stifel
VCA Inc. (WOOF) upgraded to Hold from Sell at Stifel
Valspar (VAL) upgraded to Conviction Buy from Neutral at Goldman

Downgrades (AMZN) downgraded to Neutral from Buy at Citigroup
Arcos Dorados (ARCO) downgraded to Underweight from Neutral at HSBC
Cadence Design (CDNS) downgraded to Neutral from Overweight at JPMorgan
Matador (MTDR) downgraded to Hold from Buy at Stifel
SunTrust (STI) downgraded to Equal-Weight from Overweight at Evercore


Abengoa Yield (ABY) initiated with an Equal Weight at Morgan Stanley
Actinium Pharmaceuticals (ATNM) initiated with a Buy at Canaccord
Chambers Street Properties (CSG) initiated with a Neutral at SunTrust
Minerals Technologies (MTX) initiated with an Outperform at Wedbush
NextEra Energy Partners (NEP) initiated with a Buy at BofA/Merrill
NextEra Energy Partners (NEP) initiated with a Hold at Deutsche Bank
NextEra Energy Partners (NEP) initiated with a Hold at KeyBanc
NextEra Energy Partners (NEP) initiated with a Neutral at Goldman
NextEra Energy Partners (NEP) initiated with a Neutral at UBS
NextEra Energy Partners (NEP) initiated with an Equal Weight at Morgan Stanley
NextEra Energy Partners (NEP) initiated with an Outperform at BMO Capital
QIWI (QIWI) initiated with a Positive at Susquehanna
Quality Systems (QSII) initiated with a Buy at Topeka
Trinseo S.A. (TSE) initiated with a Buy at Deutsche Bank
Trinseo S.A. (TSE) initiated with a Buy at Goldman
Trinseo S.A. (TSE) initiated with a Buy at Jefferies
Trinseo S.A. (TSE) initiated with a Neutral at Citigroup
Trinseo S.A. (TSE) initiated with an Equal Weight at Morgan Stanley
Trinseo S.A. (TSE) initiated with an Outperform at Wells Fargo
Washington Prime Group (WPG) initiated with a Neutral at SunTrust


Johnson & Johnson (JNJ) announced a $5B share repurchase program
Credit Suisse (CS) said it will exit commodities trading business
CIT Group (CIT) to acquire OneWest Bank for $3.4B in cash and stock
Time Warner (TWX) amended by-laws to block holders ability to call special meeting (FOXA)
TG Therapeutics announced preliminary clinical results from its ongoing Phase I study of TG-1101, and said 100% of CLL/SLL patients had significant nodal reduction with either a normalization of or greater than or equal to 80% reduction in Blood Lymphocyte Count.
Kindred Healthcare (KND) offered to acquire Gentiva Health (GTIV) for $17.25 per share. Kindred said it is willing to consider further increasing its offer for Gentiva
Netflix reported Q2 total streaming net additions of 1.69M. Said policy goal is for DOJ/FCC to block Comcast (CMCSA), TWC (TWC) deal


Companies that beat consensus earnings expectations last night and today include:
Verizon (VZ), Polaris Industries (PII), Signature Bank (SBNY), New Oriental Education (EDU), PLX Technology (PLXT), Crocs (CROX), First Interstate (FIBK), First Defiance Financial (FDEF), Helix Energy (HLX), Crown Holdings (CCK), Ultra Clean (UCTT), Texas Instruments (TXN), Artisan Partners (APAM), Zions Bancorp (ZION), PolyOne (POL), Waste Connections (WCN), Woodward (WWD), Rambus (RMBS), Cadence Design (CDNS), Sanmina (SANM), Trustco Bank (TRST), Chipotle (CMG), MainSource Financial (MSFG)

Companies that missed consensus earnings expectations include:
Carlisle (CSL), Del Frisco’s (DFRG), Brown & Brown (BRO), BBCN Bancorp, Inc. (BBCN), Old Line Bancshares (OLBK), AptarGroup (ATR), EMC Insurance (EMCI), TG Therapeutics (TGTX), Wilshire Bancorp (WIBC), Washington Trust Bancorp (WASH), Netflix (NFLX)

Companies that matched consensus earnings expectations include:
Regions Financial (RF), DuPont (DD), BancorpSouth (BXS), Steel Dynamics (STLD), Consumer Portfolio (CPSS), Healthstream (HSTM), Rent-A-Center (RCII), Hexcel (HXL)


Apple (AAPL) asking suppliers to produce 80M large-screen iPhones, WSJ reports
JANA investor letter discloses $1B position in Apache (APA), Bloomberg says
China food scandal spreads, drags in Starbucks (SBUX), Burger King (BKW) and McDonald’s (MCD) products in Japan, Reuters reports
Yahoo (YHOO) paying over $200M for Flurry, TechCrunch reports
Viacom’s (VIA) music group and Spotify form music streaming partnership, WSJ reports
Global notebook shipments to increase 4.3% in Q3, DigiTimes Research says
McDonald’s (MCD) stock doesn’t look ready for gains, Barron’s says


Blue Hills Bank (BHBK) 27.8M share Secondary priced at $10.00
Diamondback Energy (FANG) 5M share Secondary priced at $87.00
FBR & Co. (FBRC) announces self-tender offer to purchase up to 1M shares
Pretium Resources (PVG) files to sell $60M in common stock
Regency Energy Partners (RGP) files to sell 8.3M units for limited partners
Tallgrass Energy (TEP) files to sell 7M units representing limited partners / link to original article


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