• Second Ebola patient to arrive in U.S. on Tuesday (Reuters)
• Ebola Drug Made From Tobacco Plant Saves U.S. Aid Workers (BBG)
• Egypt plans to dig new Suez Canal costing $4 billion (Reuters)
• Apple Buybacks Pay Most Ever as CEOs Spend $211 Billion (BBG)
• DeMark Says Sell China Stocks Now After World’s Best Gain (BBG)
• Investors Stung by Losses After Exiting Struggling Property Fund in China (WSJ)
• B.A. in BTFD: MIT May Consider Granting Degrees in Less Than Four Years (BBG)
• Too late, money's already been spent: GPIF Needs Overhaul Before Asset Changes, Shiozaki Says (BBG)
• Oh look, another "truce": Israel withdraws troops, 72-hour Gaza truce begins (Reuters)
• Israel Says Tunnel Mission Complete as Cease-Fire Starts (BBG)
• Samsung Loses Top Spot in China, India as Locals Ascend (BBG)
• Ukrainian troops cross into Russia to avoid fighting, talks underway (Reuters)
• Crédit Agricole Hit By Portuguese Bank Woes (WSJ)
• Hospitals Cash In on the Newly Insured (WSJ)
• BMW Has Best Carmaking Profitability Since 2011 on SUVs (BBG)
• Goldman Sachs Dumps Weaker Hedge-Fund Clients (WSJ)
• Billionaire Musk Chooses South Texas for SpaceX Launchpad (BBG)
• China says investigating two Canadians suspected of threatening national security (Reuters)
• Japanese Stem-Cell Scientist Yoshiki Sasai Commits Suicide (WSJ)
• What Crisis? EU Rules on Banks Lauded as Right After All (BBG)

Overnight Media Digest

WSJ

* A rush of newly insured patients using health services has boosted hospital operators' fortunes but has racked up costs that insurers didn't anticipate, corporate filings and interviews with executives show. (http://on.wsj.com/1zPE63s)

* Israel and Hamas agreed to a 72-hour cease-fire in Gaza starting Tuesday as Israeli forces were winding down their month-long campaign in the Palestinian territory. The deal followed Israel's pullout of most of its forces from the Gaza Strip over the weekend. (http://on.wsj.com/1o6bfVL)

* Sand prices are rising and companies are racing to build new mines in South Dakota and other locations as demand intensifies for the silica crystals that energy companies use to frack oil and gas wells. Sand is a key ingredient in items from solar panels to smartphones, but in recent years billions of pounds of it have been poured down wells to help coax more fuel out of the ground. (http://on.wsj.com/1kjHzUa)

* Moody's Investors Service warned New York officials and investors Monday that the state's much-improved rating is at risk as the federal government tries to claw back nearly $1.3 billion in Medicaid payments. Moody's said the potential Medicaid repayment is a "credit negative" for the state. The "repayment would result in an unwelcome drain on the state's cash balances," the report said, and future repayments would "pinch the state's liquidity." (http://on.wsj.com/1kjIQur)

* The Securities and Exchange Commission said in federal court on Monday that it is seeking up to $750 million in sanctions from Texas entrepreneur Sam Wyly and the estate of his deceased brother, Charles Wyly. (http://on.wsj.com/1qUTafs)

* As regulators try to untangle the financial mess surrounding Espírito Santo International SA, multiple threads lead back to a small Swiss company whose business interests are intermingled with the powerful Portuguese conglomerate. (http://on.wsj.com/1luFfoG)

* A federal investigation into the handling of an anti-corruption commission by New York Governor Andrew Cuomo's office appears to have damaged the rising Democratic star's standing at home without hurting his chances at re-election, according to a new poll. (http://on.wsj.com/1zPAePY)

* FedEx Corp and United Parcel Service Inc are increasingly moving their own packages through the U.S. Postal Service, putting pressure on the quasi-governmental agency and raising questions about whether the USPS is charging enough for the service. (http://on.wsj.com/1o9dV48)

* China is using its six-year-old antimonopoly law to put foreign businesses under increasing pressure, a development that experts say will intensify as Beijing seeks greater sway over the prices paid by Chinese companies and consumers. (http://on.wsj.com/1luGc0c)

* LinkedIn Corp said Monday it paid nearly $6 million in back wages and damages to 359 current and former employees who the U.S. Labor Department says weren't properly paid for overtime worked between February 2012 and February 2014. (http://on.wsj.com/1pUZBsC)

* General Motors Co must turn over documents related to its subprime auto-lending under a subpoena issued by the U.S. Justice Department, the Detroit auto maker disclosed in a regulatory filing Monday. (http://on.wsj.com/1s86AAT)

* France will likely miss its deficit reduction targets due to weaker-than-hoped economic growth and risks the government will fail to implement spending cuts fully, Moody's Investors Service said Monday. (http://on.wsj.com/WXRHYM)

* Two insurers are teaming up to create health-information exchanges, making the medical records of about nine million plan members available to participating doctors and hospitals. Blue Shield of California and WellPoint Inc's Anthem Blue Cross said they would spend $80 million to fund the first three years of the California Integrated Data Exchange. The new entity, set to be announced on Tuesday, will be set up as an independent nonprofit organization, though each insurer is appointing a member of its board. (http://on.wsj.com/1xZYsEg)

FT

Governor of the Bank of Portugal Carlos Costa has blamed the former board of Banco Espirito Santo for the troubled lender's problem, after the country committed to spend 4.9 billion euros ($6.58 billion) to rescue its largest listed bank.

British drugmaker AstraZeneca Chairman Leif Johansson wants to banish ideas popularised by supporters of U.S.-listed Pfizer who claimed he and the company's board were unaccommodating in the way they handled a takeover approach from the rival firm.

Australia's Treasury Wine Estates said it will engage in talks with KKR & Co LP after the world's largest listed winemaker received a revised takeover bid from the private equity firm.

British engineering firm Weir Group fired Bank of America Merrill Lynch as one of its two lead corporate brokers and kept on board Swiss bank UBS, after the former investment bank took on the same role for a rival firm.

Highlighting a widespread industry concern, HSBC Chairman Douglas Flint warned that the fear of punishment for making mistakes was causing employees at Europe's largest bank to become too risk-averse.

Britain's competition authorities should keenly investigate the wholesale gas market as they probe the country's biggest energy suppliers to determine whether the domestic energy sector is sufficiently competitive, said Tim Yeo, the chairman of the parliament's energy select committee.

NYT

* Federal prosecutors have begun a civil investigation of General Motors Co and other companies' subprime auto lending practices, focusing on the packaging and selling of questionable loans to investors. In the inquiry, federal prosecutors are looking for potential violations of Financial Institutions Reform Recovery and Enforcement Act. (http://nyti.ms/1o7NCfA)

* Banco Espirito Santo SA is not just battling with financial problems but also legal ones. Portuguese and European prosecutors and regulators are investigating possible accounting fraud, abuse of privileged information and accusations that the bank funneled dubious loans to parts of the Espirito Santo business empire, which includes hotels, hospitals, farms and more.(http://nyti.ms/1tQaceZ)

* The Chinese government warned Microsoft Corp not to interfere with its antitrust investigation, days after officials conducted surprise raids on four of the technology giant's offices across the country. (http://nyti.ms/1soTDVB)

* Chegg Inc said that it has teamed with the Ingram Content Group, a big book distributor, to handle the business of physically storing and shipping textbooks. The deal is meant to free the company to continue building out its digital operations. (http://nyti.ms/WXIHme)

* McDonald's Corp said that a scandal over a meat supplier in China was hurting sales in the region and that its global sales forecast for 2014 was "at risk." The company said in a regulatory filing that there was "significant negative impact" in China, Japan and other affected markets, which make up about 10 percent of McDonald's revenue. (http://nyti.ms/1soAFx6)

* Google is sponsoring an elite conference this week at a golf resort in Sicily, with a guest list of chief executives, investors and celebrities, all of whom were invited to bring their families. On the agenda are high-minded discussions of global issues - along with relaxation by the Mediterranean Sea. The Google conference projects an aura of exclusivity - its existence has not previously been disclosed. It is called, simply, the Camp. (http://nyti.ms/UXRjYj)

* With Time Warner Inc's rejection last month of an $80 billion bid by Rupert Murdoch's 21st Century Fox, the mating ritual had begun, or so it seemed. But Time Warner's unyielding stance has at least some analysts wondering if an acquisition really is inevitable. (http://nyti.ms/1AQcAUV)

* The Gannett Co Inc is near a deal to buy the 73 percent of Cars.com that it does not already own for $1.8 billion, giving the media company complete control over the online car-sales website. (http://nyti.ms/UPj31s)

* The State of Texas and SpaceX, the technology company led by Elon Musk have announced that the company will build the first commercial site for orbital launches on the state's southernmost tip. (http://nyti.ms/1zPsYDK)

* Seeking to head off a costly election-year fight over oil and gas drilling that could threaten vulnerable Colorado Democrats, Governor John Hickenlooper said Monday that he had reached a deal to keep two anti fracking measures off November's ballots. (http://nyti.ms/1pzRNil)

* Warburg Pincus said on Monday that it planned to invest up to $600 million in Zenith Energy, a company that aims to build oil and natural gas terminals abroad. (http://nyti.ms/1kBnppb)

* Fosun International Ltd, the Chinese investment group that likens itself to Warren Buffett's Berkshire Hathaway Inc, said it was making its first push into the oil and natural gas business, with a $441 million bid for Roc Oil Co Ltd of Australia. (http://nyti.ms/1tOfZBF)

* Shares in the world's biggest pork producer, WH Group Ltd of China, soared in their trading debut in Hong Kong on Tuesday, signaling renewed appetite among investors for Chinese initial public offerings. WH Group's sizzling debut on the Hong Kong market came just three months after it scrapped plans for a $5.3 billion share sale. (http://nyti.ms/1mhr9an)

Canada

THE GLOBE AND MAIL

* The Canadian government's secretive electronic intelligence agency, Communications Security Establishment Canada, is not disclosing how long it can hold onto Canadians' communications, even though its leaders have said that "firm" time limits are in place to protect privacy. (http://bit.ly/1onyQLX)

* Canadian National Railway Co says it is still negotiating with the Gitxsan First Nation, as the deadline passed to vacate land along the Skeena River in northwestern British Columbia that is claimed by the Gitxsan. (http://bit.ly/1pVnCzH)

Reports in the business section:

* Amid mounting public concern over the link between pesticides and the decline of insect pollinators, the industry group that represents the makers of the chemicals says restricting use of the crop protection would "handcuff" farmers in their battle against insects. (http://bit.ly/UQcpIg)

NATIONAL POST

* An official of the city of Nunavut says a plan to douse Iqaluit's dump fire, which has been curling northern nostrils for months, has been delayed by the city's attempt to get someone else to pay for it. The fire has been fouling air with chemicals since May 20. (http://bit.ly/1pVoVhU)

* Smoke from Canada's wildfires, which have burned vast tracks of forest in British Columbia and the Northwest Territories, has been spotted as far away as Portugal. And its travel is fuelled in part by incredible clouds created by the fires, that act like chimneys funnelling smoke and ash as high as 10 to 15 kilometres into the atmosphere. (http://bit.ly/1kCiJzn)

FINANCIAL POST

* Air Canada says it may resume flights to Venezuela that were suspended in March, if outstanding issues such as the payment of funds from ticket revenues are addressed by the South American country. (http://bit.ly/1zQ7Yg0)

* A boardroom shake-up at Cliffs Natural Resources Inc has raised the likelihood that its international assets will hit the market, creating some intriguing buying opportunities for Canadian miners in their own backyard. These assets include a troubled iron ore mine in Quebec and a huge chromite deposit in Northern Ontario's "Ring of Fire". (http://bit.ly/1AQDWKu)

China

CHINA SECURITIES JOURNAL

- State-owned enterprise Aluminium Corp of China (CHALCO) and privately-owned Jinjiang Group (Hangzhou) have entered into a joint venture, as China looks to accelerate mixed ownership reforms.

SHANGHAI SECURITIES NEWS

- New loans issued by China's "big four" banks, Bank of China Ltd, China Construction Bank Corp, Industrial and Commercial Bank of China Ltd and Agricultural Bank of China Ltd, increased by 210 billion yuan ($33.99 billion) in July. Their deposits fell by about 1.5 trillion yuan, reversing from a 2.2 trillion yuan growth in June.

CHINA BUSINESS NEWS

- The seismic belt of China's Sichuan-Yunnan Region is currently active, geologist Yang Yong said.

CHINA DAILY

- China's railway building boom is expected to boost the country's struggling steel, cement, glass and other heavy industries in the second half of this year.

- More than 4,000 workers in Microsoft Corp's Nokia division may lose their jobs in the company's global downsizing plan, China Daily said, citing a person familiar with the situation.

PEOPLE'S DAILY

- China's economy grew at a "new normal" rate in the first six months of this year, with its former high-speed growth slowing but still maintaining a sustainable rebound, the newspaper said in a commentary. Adapting to these "new normal" conditions will be good for the economy, it said.

Britain

The Times

'CHARNEY CAME UP CLEAN SO WE INVESTED,' SAYS INVESTOR LEA

Lyndon Lea, the millionaire polo-playing boss of British private equity group Lion Capital, has defended his decision to invest in American Apparel, the U.S. fashion retailer that is embroiled in a bitter dispute with its founder.

DEMAND FOR HOUSES FUELS BOOM IN BUILDING

House building in Britain is increasing at the fastest rate in more than a decade, creating record numbers of jobs as demand for property continues to soar, according to the Chartered Institute of Purchasing and Supply.

BT SPURNED IN 5 BLN STG BATTLE OF AIRWAVES

BT has been shunned by the government for a lucrative deal to upgrade the way the emergency services communicate during a major incident in a bitter disappointment for the country's oldest telecoms operator.

The Guardian

EAST COAST MAINLINE PAYS TAXPAYERS 1 BLN STG SPARKING FRESH REPRIVATISATION FURY

Anger is growing over the return of the east coast mainline to private hands after it emerged that it had generated 1 billion pounds for UK taxpayers since 2009.

PENSION EXPERT CALLS FOR TAX-FREE ISAS TO BE MADE LIFETIME SAVINGS ACCOUNTS

Tax-free Isas should be transformed into "lifetime" savings accounts topped up with Treasury cash, according to Michael Johnson, a research fellow at the Centre for Policy Studies think tank.

HELP FOR HOUSING COSTS IS FORCING UP THE UK BENEFITS BILL, WARNS LABOUR

The growing housing benefit bill, particularly for those in work, is responsible for much of the increase in welfare costs, rather than out of work benefits for the idle poor, Labour will say on Tuesday.

The Telegraph

FRANCOIS HOLLANDE'S CUTS LEAVE FRANCE TRAILING BEHIND THE UK, SAYS MOODY'S

Francois Hollande's efforts to tackle France's ballooning deficit and kick-start its flagging economy have left the country trailing behind rivals such as the UK, Moody's has warned.

MET SIGNS 90 MLN STG IT DEAL WITH LOCKHEED-CAPITA-KPMG PARTNERSHIP

Defence group Lockheed Martin, along with out-sourcer Capita and consultancy KPMG, has signed a 17-year, 90 million pound ($152 million) deal to upgrade the Metropolitan Police's command-and-control system.

Sky News

RAC GEARS UP FOR FLOAT WITH RAKE APPOINTMENT

CBI President Mike Rake is in talks to become chairman of the RAC breakdown recovery service ahead of a potential 2 billion pound stock market listing.

EX-WILLIAM HILL CHIEF BACKS SCOTTISH YES VOTE

The former boss of Britain's biggest bookmaker, Ralph Topping, will declare his support on Tuesday for an independent Scotland, arguing that pro-union campaigners have been guilty of "political posturing" whose arguments lack economic logic.

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Significant domestic economic reports scheduled for today include:
Markit services PMI for July at 9:45--consensus 60.8
ISM non-manufacturing index for July at 10:00--consensus 56.5
Factory orders for June at 10:00--consensus up 0.6%

ANALYST RESEARCH

Upgrades

CGG SA (CGG) upgraded to Hold from Sell at Canaccord
CTI BioPharma (CTIC) upgraded to Buy from Hold at WallachBeth
Clayton Williams (CWEI) upgraded to Buy from Accumulate at Global Hunter
Comerica (CMA) upgraded to Neutral from Negative at Susquehanna
Fresenius Medical (FMS) upgraded to Buy from Neutral at UBS
Himax (HIMX) upgraded to Buy from Neutral at BofA/Merrill
Kite Realty Trust (KRG) upgraded to Strong Buy from Outperform at Raymond James
MYR Group (MYRG) upgraded to Outperform from Neutral at RW Baird
Mercer (MERC) upgraded to Outperform from Sector Perform at RBC Capital
Mueller Water (MWA) upgraded to Buy from Hold at Brean Capital
Telephone and Data (TDS) upgraded to Strong Buy from Outperform at Raymond James
U.S. Cellular (USM) upgraded to Strong Buy from Outperform at Raymond James

Downgrades

Five9 (FIVN) downgraded to Sector Perform from Outperform at Pacific Crest
ITT Educational (ESI) downgraded to Market Perform from Outperform at William Blair
ITT Educational (ESI) downgraded to Underperform from Neutral at BofA/Merrill
Iliad (ILIAF) downgraded to Neutral from Buy at UBS
Ocwen Financial (OCN) downgraded to Perform from Outperform at Oppenheimer
RetailMeNot (SALE) downgraded to Sector Perform from Outperform at RBC Capital
Tenet (THC) downgraded to Neutral from Positive at Susquehanna

Initiations

Alcobra (ADHD) initiated with an Overweight at Piper Jaffray
ServiceMaster (SERV) initiated with a Buy at Jefferies
ServiceMaster (SERV) initiated with an Outperform at RW Baird
ServiceMaster (SERV) initiated with an Overweight at Piper Jaffray

COMPANY NEWS

Gannett (GCI) to acquire remaining 73% interest in Classified Ventures, which owns Cars.com, from A.H. Belo (AHC) and McClatchy (MNI) for $1.8B
Gannett (GCI) to spin-off publishing business to shareholders
AIG (AIG) agreed to $960M settlement in lawsuit over allegedly misleading investors
Moody's changed U.K. banking outlook to negative from stable (HSBC, BCS, ING, CS, UBS, LYG, DB, SAN, RBS)
GT Advanced (GTAT), which reported Q2 results, narrowed FY14 guidance and backed its FY16 EPS target, reported that the build-out of the company's Arizona facility is nearly complete
Chegg (CHGG) formed a strategic alliance with Ingram Content Group
ITT Educational (ESI) CEO Kevin Modany to resign, Eugene Feichtner named COO

EARNINGS

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

Regeneron (REGN), Cinemark (CNK), Time Inc. (TIME), Akorn (AKRX), Integra LifeSciences (IART), Zebra Technologies (ZBRA), Atlas Pipeline Partners (APL), Marathon Oil (MRO), EPAM Systems (EPAM), Otter Tail (OTTR), Northwest Pipe (NWPX), Bristow Group (BRS), EarthLink (ELNK), Allied Nevada Gold (ANV), TPG Specialty Lending (TSLX), Heritage Insurance (HRTG), ChannelAdvisor (ECOM), Emerald Oil (EOX), Endurance Specialty (ENH), Protective Life (PL), Checkpoint Systems (CKP), Interactive Intelligence (inin), McDermott (MDR), Tenet (THC), Alleghany (Y), Advanced Energy (AEIS), PharmAthene (PIP), Five9 (FIVN), Limelight Networks (LLNW), Concur (CNQR), WageWorks (WAGE), Douglas Dynamics (PLOW), Rudolph Technologies (RTEC), TriNet (TNET), Varonis (VRNS), Comstock Resources (CRK), Tessera (TSRA), Pioneer Natural (PXD), Acura Pharma (ACUR), Nautilus (NLS), Kforce (KFRC), Chegg (CHGG), PetroQuest (PQ), Borderfree (BRDR), AIG (AIG), RigNet (RNET), Sykes Enterprises (SYKE), Argo Group (AGII)

Companies that missed consensus earnings expectations include:

Northwest Natural Gas (NWN), Allot Communications (ALLT), Northern Tier (NTI), Western Refining Logistics (WNRL), Western Refining (WNR), Vantage Drilling (VTG), Endeavour (END), Landauer (LDR), Landauer (LDR), Nortek (NTK), Mid-Con Energy (MCEP), Vectren (VVC), Willbros Group (WG), American Capital Senior Floating (ACSF), Dresser-Rand (DRC), Albany International (AIN), FairPoint (FRP), LeapFrog (LF), Vanguard Natural (VNR), PHH Corp. (PHH), Cubic (CUB), Approach Resources (AREX), ONE Gas (OGS), GT Advanced (GTAT), RealPage (RP), Carmike Cinemas (CKEC), Greenlight Capital (GLRE), Orion Energy (OESX), Imprivata (IMPR), CTI BioPharma (CTIC), Cutera (CUTR), RetailMeNot (SALE), Wesco Aircraft (WAIR)

Companies that matched consensus earnings expectations include:

Sucampo (SCMP), Hi-Crush Partners (HCLP), Mazor Robotics (MZOR), MDU Resources (MDU), Rosetta Resources (ROSE), Sun Hydraulics (SNHY), Mueller Water (MWA), Solar Capital (SLRC), Texas Roadhouse (TXRH), Kaman (KAMN), Kona Grill (KONA), MTS Systems (MTSC), Axcelis (ACLS)

NEWSPAPERS/WEBSITES

Fox (FOXA) anticipated to press for Time Warner (TWX) agreement Wednesday, Reuters reports
Triangle Petroleum (TPLM) seeks adviser for potential sale of unit, Bloomberg reports
Pandora (P) mulls talk radio to attract more car listeners, Bloomberg reports
Verizon (VZ) defends policy of slowing data speeds for some customers, Re/code reports
Newly insured patients boosting income for hospital operators, WSJ reports
Berkshire Hathaway (BRK.A) looks like a buy, Barron's says
Investors should hold off on Michael Kors (KORS), Barron's says

SYNDICATE

Berry Plastics (BERY) files to sell 14.73M shares for holders
Extended Stay America (STAY) files to sell 21M paired shares for holders
Physicians Realty Trust (DOC) files to sell 4.52M shares for holders

Submitted by David Stockman via Contra Corner blog,

The three charts below [eerily similar to the ones we presented here], which appeared in the Wall Street Journal, are still another reminder that the Fed’s heedless fueling of the third financial bubble this century has done enormous damage to the internals of financial markets.  In this case, investors and savers being brutally punished by ZIRP were herded into bonds funds in a desperate scramble for yield. Accordingly, bond fund assets soared from $1.6 trillion at the time of the financial crisis to $4.1 trillion today.

Yet the market’s structural liquidity condition has gone in the opposite direction. Dealer inventories of corporate bonds have plummeted by nearly 75% from pre-crash levels, meaning that the ratio of dealer inventories to bond fund assets has virtually been vaporized. In 2008 that ratio stood at 15%, but presently it is only 1.5%.  Likewise, daily trading volumes have been cut in half since the crisis.

The implication is no mystery. When the financial markets eventually succumb to a “risk-off” selling panic, the corporate bond market will gap down violently. As one astute analyst put it:

“Everyone is hoping to be first through the exit,” said Matt King, global head of credit strategy at Citigroup in London. “By definition, that’s not possible.”

Stated differently, the Fed’s explicit campaign to force grandpa out of CDs and into corporate bond funds has caused a vast mis-pricing of liquidity. In a healthy free market, bond fund yields would carry a significant discount for illiquidity, and issuers of riskier corporate credits would face far higher yield spreads vs. the 10-year treasury benchmark.

So once again, the serial bubble machine in the Eccles Building has generated a huge unnatural market deformation that is inherently unstable and increasingly fragile. When the break comes, years worth of “extra” yield will be wiped-out in a traumatic drop in bond prices caused by a panic at the exit ramp.

As the balance of the WSJ article makes clear, the risk of log-jam at the exit gates is especially acute in the $1.6 trillion junk bond market. Prior to last week’s initial sell-off, yield spreads had been squeezed to absurdly low levels - less than 300 basis points on the Merrill index. Based on the current rate of inflation and historic 4-5% long-term losses on junk bonds, the spread should be 600 basis points or more. Indeed, during the last junk bond sell-off in 2008-2009, the yield spread over the treasury benchmark blew-out to 2000 basis points before the Fed’s artificial flood of liquidity put a stop to the carnage.

But today the junk bond market is far larger; trading liquidity is far thinner; and the Fed has already used up its trick card - that is, zero interest rates and massive monetization of the public debt. Accordingly, the carnage at the junk bond exit ramp is likely to be far more extensive this time around.  More importantly, the punters who harvested gargantuan profits by buying junk at peak yields in the spring of 2009 may find that the fire brigade in the Eccles Building is MIA when the next crash hits bottom.

By Katy Burne  at The Wall Street Journal

 

A shakeout in the junk-bond market is drawing only cautious interest from bargain-hunters, underscoring investor fears that many once-hot securities could prove hard to sell in an increasingly difficult trading environment.

 

U.S. funds investing in debt rated below investment grade lost an average 1.33% last month, according to a Barclays PLC index, their second-worst monthly performance since November 2011. In June 2013, after the Federal Reserve began hinting that it would scale back its monetary easing, they lost 2.62%.

 

The latest junk-bond decline intensified last week as investors continued to make heavy withdrawals of money, in part because of worry that a recharged U.S. economy could prompt the Fed to raise interest rates sooner than expected, a move that would likely pressure bond prices.

 

Reflecting the cautious mind set, some portfolio managers are selling riskier bonds and replacing them with safer ones because of concern about market liquidity, or the capacity to quickly buy or sell securities at or near quoted prices. Many investors say liquidity is drying up as the Fed pares its monthly stimulus and large banks trim their bond inventories.

 

Investors pulled more than $5 billion in July from U.S. junk-bond mutual and exchange-traded funds, according to Lipper, a fund tracker, deepening the liquidity fears and adding to concern that the recent selloff could intensify…..

 

The downdraft in junk debt highlights concerns that purchasers in the $1.6 trillion U.S. market, lured by higher income than on government and highly rated corporate bonds, have paid too much for the securities. Prices have rallied, sending yields to levels too low to compensate buyers for the risk of the investments, many investors say. 

 

Read more here...

*  *  *

As we explained in great detail here, this is already happening in the strangest of places.

The problem is that the Fed's dominance of the market and unintended consequences of controlling the repo/shadow-banking system have left bond markets more fragile than they have ever been.

• So that's what Obama meant by "costs"- Italy Recession, German Orders Signal Euro-Area Struggle (BBG)
• Russia worries, weak German data weigh on Europe (Reuters)
• Hedge Funds Betting Against Banco Espírito Santo in Line for Big Gains (WSJ)
• Bankers Called Up for Ukraine War as Rolls-Royce for Sale (BBG)
• Double Punch for 'Inversion' Deals (WSJ)
• Statist Strongmen Putin-Xi See History’s Capitalism Clash (BBG)
• China bans beards, veils from Xinjiang city's buses (Reuters)
• BATS to Settle High-Speed Trading Case (WSJ)
• Second Ebola patient wheeled into Atlanta hospital for treatment (Reuters)
• Feces-Clogged Shore Shows Africa Infrastructure Failings (BBG)
• China anti-trust regulator conducts new raids on Microsoft, Accenture (Reuters)
• Wells Fargo loosens standards for jumbo mortgages (Reuters)
• Standard Chartered Profit Slips 20% on Financial Markets (BBG)
• Milk prices sink as "white gold" floods even China demand (Reuters)

Overnight Media Digest

WSJ

* 21st Century Fox has withdrawn its proposal to acquire Time Warner, saying the owner of HBO has "refused to engage with us." (http://on.wsj.com/1v8re9L)

* Sprint Corp decided to end its pursuit of T-Mobile US Inc in the face of stiff opposition from regulators and to replace Chief Executive Dan Hesse. (http://on.wsj.com/1nqMxti)

* Apple Inc and Samsung Electronics Co Ltd are calling a partial truce in their smartphone war. The two technology giants agreed to dismiss all patent disputes between them in courts outside the United States, marking an easing of tensions. (http://on.wsj.com/1odLjqj)

* Private-equity firm TPG, after a few disastrous deals, is pursuing a revival based on smaller investments and a new fund, while laying the groundwork for a possible IPO. (http://on.wsj.com/1nqMOMY)

* An Afghan soldier killed a two-star U.S. Army general when he opened fire on a group of Western military officers Tuesday, claiming the highest-ranking American casualty in more than a decade of war. (http://on.wsj.com/1opPbzI)

* In a sweeping rebuke to Wall Street, U.S. regulators said 11 of the nation's biggest banks haven't demonstrated they can collapse without causing damaging economic repercussions and ordered them to try again. (http://on.wsj.com/1oAzFFN)

* Overseas takeover deals designed to lower corporate taxes took a double-punch on Tuesday when Walgreen Co ruled out the tactic for a foreign merger and the U.S. Treasury Department said it was looking for ways to deter the strategy. (http://on.wsj.com/1v9aNtJ)

* BATS Global Markets Inc is in advanced talks with regulators to settle allegations that it gave unfair advantages to high-speed traders. (http://on.wsj.com/1lywRED)

* The TV-and-publishing conglomerate is an endangered species. Gannett Co Inc joins media companies that have decided their broadcasting businesses should split from their newspapers or magazines. (http://on.wsj.com/1oAzV7v)

* U.S. and African leaders on Tuesday unveiled $14 billion in commercial deals in Washington, part of a campaign to improve on a trade relationship in which the two parties still do little business together. (http://on.wsj.com/1nqNpy6)

* T-Mobile US Inc denied Iliad SA's request for access to the U.S. telecom's books after determining that the French company's proposed $15 billion bid wasn't strong enough, people familiar with the matter said. (http://on.wsj.com/1nqNDVY)

* Spain's Telefonica SA is offering $8.99 billion in cash and shares for Vivendi SA's Brazilian unit GVT, in a bid to create Brazil's largest telecom operator. (http://on.wsj.com/1ATnZ6j)

* A German court agreed to drop a criminal case against Formula One magnate Bernie Ecclestone for alleged bribery, pending payment of a $100 million fine. (http://on.wsj.com/1ukXan7)

* China's top economic planning agency said on Wednesday it will punish Audi AG and Chrysler after an investigation found the two luxury car makers had pursued monopoly pratices. (http://on.wsj.com/1ob0vWg)

* Australia's Orica Ltd said on Wednesday it wants to sell or list its chemicals business making everything from dyes to fertilizers, which analysts estimate could be worth up to 1 billion Australian dollars($930.40 million). (http://on.wsj.com/1qW5tbt)

FT

French telecom company Iliad's bid for T-Mobile US is to be rejected, as shareholders of the No. 4 U.S. mobile operator, including Deutsche Telekom, believe the $15 billion offer falls short of their valuation of the business.

BlackRock, the world's largest money manager, has expressed concern over the quality of floatations in Europe, as hedge funds increase their bets against private equity-backed IPOs, after souring of a string of high-profile listings has caused market conditions to droop.

Gannett Co, the publisher of USA Today, has become the latest media company to separate off its publishing unit from its faster-growing TV and digital operations.

A German court decision to accept a record $100 million fee to settle charges of bribery against Bernie Ecclestone, the chief executive of Formula One, has provoked criticism from parts of the country's establishment.

Chinese anti-monopoly investigators have raided the Shanghai offices of Daimler AG's luxury brand Mercedes-Benz, as the government investigates global automakers with business the country, in relation to price fixing.

Spain's Telefonica has made 6.7 billion euros ($8.96 billion) offer to buy Vivendi's Brazilian broadband unit, as it looks to further expand in Latin America's largest economy.

NYT

* Twenty-First Century Fox Inc withdrew its takeover offer of $75 billion from Time Warner Inc. Fox was put off both by Time Warner's apparent hostility to the prospect of the deal and by the response of its own shareholders, who have been driving the price of Fox's stock down since news of the offer broke. (http://nyti.ms/1ATccoG)

* Sprint Corp and its corporate parent, the Japanese telecommunications giant SoftBank Corp, have decided to drop their pursuit of T-Mobile US Inc after conceding that antitrust regulators would block a deal in an industry that is dominated by just a few large players. (http://nyti.ms/X0opst)

* U.S. president Barack Obama is weighing plans to circumvent Congress and act on its own to curtail tax benefits for United States companies that relocate overseas to lower their tax bills, seeking to stanch a recent wave of so-called corporate inversions. (http://nyti.ms/1tUAUDi)

* A Russian crime ring has amassed the largest known collection of stolen internet credentials, including 1.2 billion user name and password combinations and more than 500 million email addresses, security researchers say. Computer crime experts who had reviewed the data said some big companies were aware that their records were among the stolen information. (http://nyti.ms/1p8HVgG)

* Standard Chartered PLC has once again landed in the government's cross hairs for failing to weed out other risky transactions flowing through its American operations. This time, New York State's financial regulator is preparing an action against the bank over breakdowns in a computer system that was supposed to detect transactions vulnerable to money laundering. (http://nyti.ms/1nqGiFY)

* The Federal Reserve and the Federal Deposit Insurance Corporation criticized plans that big banks had prepared for winding themselves down in a controlled fashion. (http://nyti.ms/1v9dkUP)

* Gannett Co Inc announced that it would spin off its newspaper division, which includes USA Today, into a separate company next year. (http://nyti.ms/1sd5DYd)

* Japan imposed new sanctions on Russia on Tuesday but kept them more limited than those recently ordered by the United States. The Japanese sanctions will freeze any assets in Japan belonging to two organizations and 40 individuals connected with Russia's involvement in Ukraine. (http://nyti.ms/1oAsJs8)

* The German automobile giant Daimler AG has become the latest multinational company to bear the brunt of a Chinese regulatory investigation. Officials from an agency that enforces antimonopoly and pricing rules has searched its Shanghai offices.(http://nyti.ms/1odFUQ2)

* Mexico's Congress approved a sweeping overhaul of the energy industry that cleared the way for international giants to tap Mexico's rich reserves of oil and gas. The government hopes that the entry of international energy giants will lift sagging oil output, exploit untapped reserves of natural gas, lead to new refineries being built and result in cheaper power for Mexico's factories. (http://nyti.ms/X0u5CA)

* The Walgreen Co is said to be near a deal to take over the British pharmacy retailer Alliance Boots Holdings Ltd, but through a plan to do so without moving its corporate headquarters abroad. (http://nyti.ms/1qW1RpU)

* Telefonica SA of Spain said on Tuesday that it had offered about $8.9 billion in cash and shares for Global Village Telecom, a Brazilian company controlled by Vivendi SA of France. (http://nyti.ms/UUbNBm)

* The proxy advisory firm Glass Lewis & Company LLC is recommending that Allergan Inc shareholders support Pershing Square Capital Management's push for a special meeting of shareholders. Pershing Square, the hedge fund led by William Ackman, is trying to remove six incumbent members of the Allergan board and make other governance changes. (http://nyti.ms/1nqKh5j)

* Citigroup Inc's 2011 deal with the Securities and Exchange Commission has finally cleared its last hurdle. Judge Jed Rakoff of federal district court in Manhattan, who initially rejected the $285 million settlement, announced on Tuesday that he would approve the deal. (http://nyti.ms/1stP63X)

Canada

THE GLOBE AND MAIL

* Two Canadians are being investigated by China for spying, but Ottawa has stayed quiet. It is a sign of a government trying, for now, to avoid making things worse. But the detention of Christian cafe owners Kevin and Julia Garratt still has the potential to blow a hole in Canada-China relations. (http://bit.ly/1pX1K6R)

* Brampton mayor Susan Fennell charged the city nearly C$128,000 in expenses for airfare passes, several of which expired before she and her staff could use them, a forensic audit released Tuesday evening found. (http://bit.ly/1lzcya2)

Reports in the business section:

* Canadian and European negotiators have finalized the text of their awaited free-trade deal after months of hard bargaining over everything from agriculture and banking to investment rules. (http://bit.ly/UUVzrE)

NATIONAL POST

* One week after the Green Party of Canada president wrote a blog expressing support for Israel, which he signed and then posted on the party's website, Paul Estrin is stepping down. (http://bit.ly/1p9ISW1)

* The City of Toronto is bracing for construction claims related to renovations at Union Station, according to a new report on the fraught railway terminus overhaul. (http://bit.ly/1zTbnuv)

FINANCIAL POST

* The number of homes sold in Canada's most expensive market topped 3,000 in July, marking a fourth straight month sales have hit that level. The Vancouver sales market has not been this strong in three years, according to the real estate board of greater Vancouver. (http://bit.ly/1y4GGQp)

* The 2014 Ontario budget prohibits employers from self-insuring long-term disability benefits. The budget, passed on July 24, amends the Insurance Act so that employers who provide Long Term Disability (LTD) must do so through arrangements with licensed insurers. The change will come into effect on a date to be proclaimed. (http://bit.ly/1suszDo)

China

CHINA SECURITIES JOURNAL

- The National Development and Reform Commission said it will accelerate preparatory work in a bid to promote construction and funding for major transportation projects.

SHANGHAI SECURITIES NEWS

- After six large state-owned enterprises announced restructuring plans to introduce mixed ownership through private capital, a raft of other state-owned companies have also announced similar plans, including China Hi-Tech Group Corp, China Guodian Corp and China Metallurgical Group Corp.

21st CENTURY BUSINESS HERALD

- Only nine of 161 Chinese cities reached the more stringent air quality monitoring standards in the first half of this year, according to the Ministry of Environmental Protection. Zhoushan, Shenzhen, Zhuhai, Zhanjiang, Yunfu, Beihai, Sanya and Lhasa are the cities which reached the standard, the ministry said.

SHANGHAI DAILY

- China's machinery industry continued to recover with rising profitability in the first half of the year, following moderate growth in 2013, according a report issued by the China Machinery Industry Federation (CMIF). Aggregate profits across the sector rose 19.6 percent to 715.3 billion yuan ($115.94 billion), versus an average 15.6 percent growth for the whole of 2013.

CHINA DAILY

- Chinese handset maker Xiaomi Corp nearly tripled its smartphone shipments in the second quarter, beating long time market leader Samsung Electronics Ltd in China, the world's largest smart phone market, according to a report by Canalys.

PEOPLE'S DAILY

- China's e-commerce sector is continuing its robust growth pace, with total transaction volume exceeding 10 trillion yuan last year, accounting for about 11 percent of total social spending, the paper said.

Britain

21ST CENTURY FOX DROPS $80BN TIME WARNER BID

Twenty-First Century Fox, the entertainment conglomerate run by Rupert Murdoch, has abandoned its $80 billion bid for Time Warner, saying that to pursue a higher offer would not deliver value for its shareholders.

The Guardian

DIPPING INTO PENSIONS COULD BE AN ALTERNATIVE TO PAYDAY LOANS, SAYS EXPERT

Savers should be allowed to access their pensions before retirement in an emergency as an alternative to payday loans, pensions expert Hargreaves Lansdown has suggested.

CLICK AND COLLECT TAKES OFF AS RETAILERS READY FOR CHRISTMAS BATTLE

As the plane touches down after a week or two away in the sun, it will be a relief to some tired travellers that the homecoming grocery order they placed online will already be waiting for them - shortly beyond passport control and the baggage carousel.

The Telegraph

NEIL WOODFORD: GLAXOSMITHKLINE'S TROUBLES ARE ONLY TEMPORARY

Veteran fund manager Neil Woodford has revealed that a "long conversation" with GlaxoSmithKline boss Andrew Witty, following a recent profit warning, inspired confidence in the company.

Sky News

WALGREENS SHUNS INVERSION IN 5 BLN STG BOOTS DEAL

Walgreens, one of America's biggest corporate names, is poised to bow to intense U.S. political pressure by retaining its headquarters in the U.S., even as it secures a full takeover of Alliance Boots, Britain's biggest pharmacy chain.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Significant domestic economic reports scheduled for today include:
U.S. trade balance for June at 8:30--consensus deficit ($45.0B)

ANALYST RESEARCH

Upgrades

Armada Hoffler (AHH) upgraded to Buy from Hold at Stifel
BB&T (BBT) upgraded to Outperform from Market Perform at Wells Fargo
Cablevision (CVC) upgraded to Neutral from Sell at Citigroup
Cerner (CERN) upgraded to Outperform from Market Perform at Wells Fargo
Chuy's (CHUY) upgraded to Buy from Hold at Jefferies
First Solar (FSLR) upgraded to Buy from Hold at Needham
General Electric (GE) upgraded to Outperform from Market Perform at Bernstein
Horizon Technology (HRZN) upgraded to Market Perform at Keefe Bruyette
Itron (ITRI) upgraded to Hold from Sell at Brean Capital
Provident Financial (PROV) upgraded to Market Perform from Underperform at Raymond James
Salix (SLXP) upgraded to Buy from Hold at Cantor
Union First Market (UBSH) upgraded to Buy from Neutral at Compass Point

Downgrades

Approach Resources (AREX) downgraded to Neutral from Outperform at RW Baird
Bally Technologies (BYI) downgraded to Hold from Buy at Stifel
Bloomin' Brands (BLMN) downgraded to Hold from Buy at Jefferies
Enzymotec (ENZY) downgraded to Market Perform from Outperform at Wells Fargo
Groupon (GRPN) downgraded to Hold from Buy at Wunderlich
Monster Worldwide (MWW) downgraded to Neutral from Outperform at RW Baird
National CineMedia (NCMI) downgraded to Neutral from Overweight at Piper Jaffray
Norwegian Cruise Line (NCLH) downgraded to Neutral from Buy at UBS
Southern Copper (SCCO) downgraded to Market Perform from Outperform at FBR Capital
Tanger Factory (SKT) downgraded to Neutral from Buy at UBS
Time Warner (TWX) downgraded to Sell from Hold at Topeka
Vanguard Natural (VNR) downgraded to Hold from Buy at Wunderlich

Initiations

Burlington Stores (BURL) initiated with a Neutral at Sterne Agee
EZchip (EZCH) initiated with an Outperform at Imperial Capital
Michaels Stores (MIK) initiated with a Buy at Deutsche Bank
Michaels Stores (MIK) initiated with a Buy at Goldman
Michaels Stores (MIK) initiated with a Market Perform at Wells Fargo
Michaels Stores (MIK) initiated with an Equal Weight at Barclays
Michaels Stores (MIK) initiated with an Equal Weight at Morgan Stanley
Michaels Stores (MIK) initiated with an Overweight at JPMorgan
Michaels Stores (MIK) initiated with an Overweight at Piper Jaffray
Nordson (NDSN) initiated with a Market Perform at Wells Fargo
ServiceMaster (SERV) initiated with a Buy at BofA/Merrill
ServiceMaster (SERV) initiated with a Buy at Goldman
ServiceMaster (SERV) initiated with a Sector Perform at RBC Capital
ServiceMaster (SERV) initiated with an Overweight at JPMorgan
ServiceMaster (SERV) initiated with an Overweight at Morgan Stanley
Tesla (TSLA) initiated with an Outperform at Pacific Crest
Under Armour (UA) initiated with a Fair Value at CRT Capital

COMPANY NEWS

21st Century Fox (FOXA) withdrew its proposal to acquire Time Warner (TWX) and announced a $6B share repurchase program. Fox said Time Warner's management "refused to engage with us to explore an offer which was highly compelling"
Time Warner (TWX) said it is committed to enhancing long-term value and it is well-positioned for success
Walgreen (WAG) exercised option to acquire remaining 55% of Alliance Boots. The company is set to be headquartered in the Chicago area. Walgreen also announced a $3B share repurchase program and increased the quarterly dividend 7.1% to 33.75c per share
Morgan Stanley (MS) said it added $53M to legal costs in Q2, cutting EPS by 2c
Cytori Therapeutics (CYTX) said it placed enrollment in the ATHENA and ATHENA II trials on clinical hold
Disney (DIS) CEO said company focused on current assets, not targeting large acquisitions
Cerner (CERN) to acquire Siemens Health Services (SIEGY) for $1.3B in cash

EARNINGS

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

Disney (DIS), Activision Blizzard (ATVI), Abraxas Petroleum (AXAS), Cognizant (CTSH), Voya Financial (VOYA), Aqua America (WTR), EnLink Midstream (ENLK), EOG Resources (EOG), Southwest Gas (SWX), J2 Global (JCOM), Versartis (VSAR), Bio-Rad (BIO), Marchex (MCHX), Enphase Energy (ENPH), Quality Distribution (QLTY), HCI Group (HCI), Famous Dave's (DAVE), Hackett Group (HCKT), Super Micro Computer (SMCI), Midstates Petroleum (MPO), KAR Auction (KAR), WPX Energy (WPX), Colony Financial (CLNY), Ladder Capital (LADR), Paycom Software (PAYC), Corcept Therapeutics (CORT), Interval Leisure (IILG), Jazz Pharmaceuticals (JAZZ), Tutor Perini (TPC), Ocean Rig UDW (ORIG), Trimble (TRMB), Mercury Systems (mrcy), Itron (ITRI), Take-Two (TTWO), Potbelly (PBPB), XO Group (XOXO), Rex Energy (REXX), American Public Education (APEI), DryShips (DRYS), ZAGG (ZAGG), Strattec Security (STRT), FireEye (FEYE), WebMD (WBMD), Evolving Systems (EVOL), Fiesta Restaurant (FRGI), Taylor Morrison (TMHC), Viasystems (VIAS)

Companies that missed consensus earnings expectations include:

Spectra Energy (SE), Memorial Production (MEMP), DISH (DISH), Dawson Geophysical (DWSN), CytRx (CYTR), Continental Resources (CLR), Era Group (ERA), Ormat Technologies (ORA), Oasis Petroleum (OAS), Axiall (AXLL), Blueknight Energy Partners (BKEP), Tidewater (TDW), Liberty Global (LBTYA), Black Hills (BKH), DCP Midstream (DPM), Papa John's (PZZA), Thompson Creek (TC), Atlas Financial (AFH), Scientific Games (SGMS), Powell (POWL), MacroGenics (MGNX), Zogenix (ZGNX), Five Prime (FPRX), Cimarex Energy (XEC), ChemoCentryx (CCXI), RadiSys (RSYS), Ixia (XXIA), ONEOK (OKE), Zillow (Z), RealD (RLD), ONEOK Partners (OKS), Stone Energy (SGY), Model N (MODN), NanoString (NSTG), Alder Biopharmaceuticals (ALDR), Pegasystems (PEGA), Portfolio Recovery (PRAA), First Solar (FSLR), TechTarget (TTGT), Rosetta Stone (RST), ACADIA (ACAD), Wright Medical (WMGI), Chuy's (CHUY), Vitesse (VTSS)

Companies that matched consensus earnings expectations include:

Groupon (GRPN), Spectra Energy Partners (SEP), Western Gas Partners (WES), Globus Medical (GMED), Universal Technical Institute (UTI), Virtusa (VRTU), Meadowbrook Insurance (MIG), Avanir (AVNR), ProAssurance (PRA), Frontier Communications (FTR)

NEWSPAPERS/WEBSITES

Sprint (S) ends talks to buy T-Mobile (TMUS), WSJ reports
Sprint (S) could name Marcelo Claure as new CEO, Reuters reports
Goldman Sachs (GS), Morgan Stanley (MS) added to NY AG dark pool probe, Fox Business News reports
Standard Chartered (SCBFF) in discussions to settle transaction claims, Bloomberg reports
SAIC enacts fresh raids on Microsoft (MSFT), Accenture (ACN), Reuters reports
Apple (AAPL), Samsung (SSNLF) to drop all litigation outside U.S., Re/code reports
CVS Caremark (CVS) still looks like a buy, Barron's says

SYNDICATE

Auris Medical (EARS) 9.4M share IPO priced at $6.00
CTPartners (CTP) files to sell $50M of common stock
Manchester United (MANU) 12M share Secondary priced at $17.00
TPG Specialty Lending (TSLX) files to sell 5M shares for holders

Submitted by David Stockman via Contra Corner blog,

Practically since the day Lehman went down in September 2008 Washington has been conducting a monumental farce. It has been pretending to up-root the causes of the thundering financial crisis which struck that month and to enact measures insuring that it would never happen again. In fact, however, official policy has done just the opposite.

The Fed’s massive money printing campaign has perpetuated and drastically enlarged the Wall Street casino, making the pre-crisis gamblers in CDOs, CDS and other derivatives appear like pikers compared to the present momentum chasing madness.  In a nutshell, the Fed’s prolonged regime of ZIRP and wealth effects based “puts” under risk assets has destroyed two-way markets. The market’s natural mechanism of risk containment and stabilization—-short sellers—has been driven from the casino. Accordingly, carry-trade speculators engorged with free money funding have taken the market to lunatic heights, while leaving it vulnerable to a violent collapse upon an unexpected drop because the market’s natural braking mechanism—short sellers taking profits—- has been eviscerated.

At the same time, the giant regulatory diversion known as Dodd-Frank has actually permitted the TBTF banks to get even bigger and more dangerous. Indeed, JPM and BAC were taken to their present unmanageable size by regulators—ostensibly fighting the last outbreak of TBTF—who imposed or acquiesced to the shotgun mergers of late 2008.

So now these same regulators, who have spent four years stumbling around in the Dodd-Frank puzzle palace confecting thousands of pages of indecipherable regulations, slam their wards for not having sufficiently robust “living wills”. C’mon! This is just another Washington double-shuffle.

The very idea that $2 trillion global banking behemoths like JPMorgan or Bank of America could be entrusted to write-up standby plans for their own orderly and antiseptic bankruptcy is not only just plain stupid; it also drips with political cynicism and cowardice. If they are too big to fail, they are too big to exist. Period.

Indeed, it is utterly amazing that adult legislators and regulators could even take the idea of a “living will” seriously—-let alone believe that they could possibly thwart the recurrence of another outbreak of so-called “financial contagion”. Yet so thick is the beltway cynicism and so complete is the K-Street domination of policy-making that a trite bureaucratic gimmick like the “living will” has become a major component of so-called macro-prudential policy.

So there is nothing to do except go back to the fundamentals. First and foremost, the September 2008 meltdown was not a main street banking problem; it was a crisis confined to the canyons of Wall Street, owing to the fact that the gambling houses domiciled there had massively bloated their balance sheets with toxic assets and risky derivatives trades, and then funded these balance sheets leveraged at 30:1 with huge amounts of “hot money” in the form of repo and unsecured wholesale loans.

As I demonstrated in the Great Deformation, the “bank run” was almost entirely in the Wall Street wholesale market. By contrast, there was never any danger of retail runs at the corner branch bank offices, and the overwhelming majority of the 7,000 main street banks did not own the kind of toxic securitized assets that were roiling Wall Street.

In fact, the wholesale market runs in the canyons of Wall Street were actually a positive, economically therapeutic event. They had already taken out three of the reckless gambling houses—- Bear Stearns, Lehman and Merrill Lynch—-and were fixing to finish off the remainder, that is, Goldman and Morgan Stanley.

Had the market been allowed to finish off the work of the economic gods in late September 2008, the TBTF problem would have been substantially alleviated. Today there might have existed a half dozen “sons of Goldman” in the form of M&A, trading, investment banking and asset management boutiques—run by chastened veterans who lost their lunch during the 2008 Wall Street cleansing.

The excuse for Washington’s massive intervention against the free market in the form of TARP and the Fed’s monumental flood of liquidity, of course, is that the US economy was about to be annihilated by something called financial “contagion”.  But that is a specious urban legend invented by the crony capitalists who controlled the Treasury and the money-printers who had fueled the housing and credit bubble at the Fed.

As I have also shown, for example, AIG’s dozens of insurance subsidiaries were money good and would have been protected in bankruptcy by insurance regulators and capital maintenance rules, while settlement of the holding company’s fraudulent CDS insurance would have been parceled out pennies on the dollar by a Chapter 11 judge to the dozen giant global banks who had stupidly attempted to turn toxic CDOs into AAA credits. Likewise, FDIC could have liquidated Citigroup’s regulated bank, while allowing the gamblers who bought the stock, bonds and other obligations of the holding company to face their just deserts.

In short, TBTF became a “problem” to be ostensibly remedied with bureaucratic malarkey like living wills primarily because Washington made it a problem—- by means of its panicked bailouts of Wall Street in the fall of 2008. Indeed, the true solution to TBTF is always and everywhere to allow the free market to cleanse its own excesses and imbalances and to impose financial discipline and demise upon outbreaks of reckless gambling and leverage when they occur.

Unfortunately, even if Washington were to refrain from ad hoc bailouts, the free market cure would be perennially compromised by the giant moral hazard posed by deposit insurance and the Fed’s cheap money discount window. Owing to these policy institutions, which systematically encourage excessive gambling by their beneficiaries, US banks are inherent wards of the state—including the easily abused privilege of fractional reserve banking conferred by regulatory charters.  The right thing to do would be to abolish these sources of moral hazard and tell the K-Street financial lobbies to fold up their plush tents because their employers are now all expected to sink or swim on the free market.

Needless to say, the chances that Washington would permit the Wall Street gambling houses to be returned to the unfettered free market that they profess to defend—are somewhere between slim and none. Accordingly, a second best solution is warranted, and it could readily be done.  And it would be far more effective than the lunacy of living wills and all the other bureaucratic mumbo-jumbo that has come out of Dodd-Frank.

First, Washington should re-enact a strict version of Glass- Steagall. Only “narrow banks” which take deposits and make consumer and business loans would have access to the Fed’s discount window. By contrast, propriety trading, underwriting, merchant banking, asset management and all the rest of the financial services sectors would be banned at regulated banks and sent back to the free market where they belong.

Secondly, a ceiling on regulated bank size would be established—perhaps measured at 1% of GDP or $200 billion in terms of asset scale. There are no demonstrated economies of scale in deposit and loan banking above that size, anyway.

Stated differently, banks wishing to indulge in the moral hazard of deposit insurance and accessing the Fed’s discount window would not have to prove they were not “too big to fail” or that they had a viable “living will”. Instead, a TBTF law would do it for them in the form of a statutory cap on the size of regulated banks.

To be sure, Wall Street would scream that such a regime would interfere with the ability of small business and American consumers to get cheap loans. But in a national economy that has gone through a rolling 30-year LBO resulting in $60 trillion of credit market debt outstanding and which sports leverage ratios against income in all sectors that are off the historical charts—that complaint has no merit. Making debt more expensive and permitting it to be economically priced on the free market is, in fact, just what is needed to eventually cure the nation’s debt-ridden economic malaise.

• Russia bans all U.S. food, EU fruit and vegetables in sanctions response (Reuters)
• Snowden receives three-year Russian residence permit (Reuters)
• Headline of the day: Europe's Recovery Menaced by Putin as Ukraine Crisis Bites (BBG)
• Americans worry that illegal migrants threaten way of life, economy (Reuters)
• Almost 90% of Uninsured Won't Pay Penalty Under the Affordable Care Act in 2016 (WSJ)
• Germany’s Bond Advance Sends 2-Year Note Yield Below Zero (BBG)
• Gaza War’s Critics in Crosshairs as Israelis Back Offensive (BBG)
• The 1% May Be Richer Than You Think, Research Shows (BBG)
• Bank of America Near $16 Billion to $17 Billion Settlement (WSJ)
• Deep Water Fracking Next Frontier for Offshore Drilling (BBG)
• Americans Give Up Passports as Asset-Disclosure Rules Start (BBG)
• Google to Boost Encrypted Websites in Rankings (WSJ)
• The San Francisco 49ers' New Football Stadium Is a Dud (BBG)
• Drone crashes into famed hot spring at Yellowstone National Park (Reuters)

Overnight Media Digest

WSJ

* Bank of America Corp and the Justice Department are close to a deal in which the bank will pay between $16 billion and $17 billion to resolve allegations of mortgage-related misconduct in the run-up to the financial crisis. (http://on.wsj.com/1vbZWze)

* The dust appeared to be settling on 21st Century Fox's brief pursuit of Time Warner Inc, as both entertainment conglomerates pointed to strong quarterly earnings and declared themselves well-positioned on their own. (http://on.wsj.com/1pY3f4J)

* President Barack Obama is focused on putting in place a global security structure that will last decades, but his handling of crises in the Mideast and Ukraine has driven support for his foreign policy to new lows. (http://on.wsj.com/1syF2qw)

* Almost 90 percent of the United States' 30 million uninsured won't pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement. (http://on.wsj.com/1kJvpEG)

* Google Inc wants to reward websites that are more secure. The world's most popular search engine said it is now giving bonus points in its ranking algorithm to Web pages that are encrypted. Google hopes the move will prod website developers to adopt technology that protects against hackers breaking into their websites and stealing users' information. (http://on.wsj.com/1syVYND)

* Talk of cracking down on U.S. corporations that move offshore is making some other companies nervous - notably, foreign-owned concerns, which are warning of cuts to their U.S. employment or investment if they are caught in the cross hairs. (http://on.wsj.com/1pDhFtJ)

* The failure of the biggest U.S. banks to convince regulators they can go bust without bringing down the financial system is likely to further strain an already tense relationship between Wall Street and Washington. (http://on.wsj.com/1pY541O)

* Sprint Corp's new boss is a 6-foot 6-inch Bolivian billionaire whose efforts could determine whether the wireless firm's decision to end a $32-billion plan to buy T-Mobile US Inc was a savvy, pragmatic move or a disaster. (http://on.wsj.com/X36WQ1)

* Without a Sprint Corp deal, T-Mobile US Inc has to weigh a possible merger with another suitor against going it alone in a market that is about to get more competitive and more expensive. (http://on.wsj.com/XFK49c)

* The number of people to have died in the worst Ebola outbreak in history has risen to at least 932, the World Health Organization said on Wednesday, as overworked hospital staff struggled to quell the epidemic and in many cases became its front-line victims. (http://on.wsj.com/1ko5ty3)

* Walgreen Co faced investor backlash after deciding against relocating its corporate headquarters overseas as part of its acquisition of the rest of European drugstore chain Alliance Boots GmbH. (http://on.wsj.com/1kJERb9)

* Pfizer Inc has reached a $35 million settlement with 41 states and the District of Columbia over alleged improper marketing of its drug Rapamune, New York Attorney General Eric Schneiderman said on Wednesday. (http://on.wsj.com/1oDznxI)

* A European spacecraft called Rosetta has become the first in history to rendezvous with and orbit a comet, a milestone in space exploration that could reveal valuable clues about how the solar system was created and how it evolved. (http://on.wsj.com/1syK6v7)

* As fighting between Israel and Hamas raged over the past week, Israeli tech companies had one of their best runs ever. Investors and buyers didn't stay away either, with one acquisition announced and four initial public offerings. Still, quite a few startups in the country's busy tech sector had staff called away on mandatory military reserve duty, as did some of their suppliers and business partners. (http://on.wsj.com/XFluWb)

* A collection of more than one billion website logins allegedly stockpiled by a Russian crime gang may not pose as much of a new security threat as a computer-security company suggested, other security researchers and cybercrime experts said. (http://on.wsj.com/1up6t5x)

FT

Twenty-First Century Fox Inc has soothed investor concerns, saying that it will not make another offer for Time Warner Inc or any other large content company, after withdrawing its bid for the firm behind HBO and Turner.

Legal & General Group Plc is exploring a possible multibillion pound "bulk" annuity deal with North American and European firms, as the insurer strives to lessen the impact of a decline in individual annuities sales in the UK.

Lloyds Banking Group Plc has decided to defend itself against a lawsuit filed by some of its investors, which could possibly be one of the largest ever, in terms of damages claimed, to be heard by the English courts.

Standard Chartered Plc has warned that it expects to pay a fine to New York's financial regulators for failing to draw their attention to suspicious transactions - less than two years after it first fell short of complying with U.S. sanctions laws.

SoftBank Corp CEO Masayoshi Son has blamed U.S. competition watchdogs for its subsidiary, Sprint Corp, having to give up its chase of Deutsche Telekom AG's T-Mobile US Inc.

Buyout funds including Bain Capital and Apax are expected to make final offers for U.S.-based Toms during the next few weeks, valuing the footwear company, which donates a pair of shoes for every one it sells, at between $600 million and $700 million, sources have said.

African Minerals Ltd has revealed that it investigated Chairman Frank Timis in relation to allegations that the founder and two other directors personally gained from a $50 million payout made by the iron ore miner to commodity trading group Global Iron Ore Cyprus.

NYT

* Bank of America Corp and the U.S. Justice Department have reached a tentative deal to settle an investigation into the sale of toxic mortgage securities in the run-up to the financial crisis. The tentative deal is expected cost Bank of America more than $16 billion. (http://nyti.ms/1ko1uS4)

* Kent Brantly and Nancy Writebol, the two Americans infected with Ebola in West Africa, appeared to be responding to an experimental medicine devised by an obscure biotechnology company with ties to the Defense Department. Mapp Biopharmaceutical, the primary developer of the drug, was consumed Wednesday with how to manufacture more of it with an eye to providing the drug to more patients, probably in the form of clinical trials. (http://nyti.ms/1uoRVTq)

* Searching for ways to hit back at Western sanctions without causing Russian consumers too much pain, President Vladimir Putin gave his government a broad mandate to issue one-year bans on food and agricultural imports. But he included a proviso that the bans be lifted if they drive up prices or cause undue dependence on a single source. (http://nyti.ms/1nugtEU)

* Google Inc and Barnes & Noble Inc are joining forces to tackle their mutual rival Amazon.com Inc , zeroing in on a service that Amazon has long dominated, the fast and cheap delivery of books. Book buyers in Manhattan, West Los Angeles and the San Francisco Bay Area will be able to get same-day deliveries from local Barnes & Noble stores through Google Shopping Express, Google's fledgling online shopping and delivery service. (http://nyti.ms/V3kyZA)

* High-speed rail was supposed to be U.S. President Barack Obama's signature transportation project, but despite the administration spending nearly $11 billion since 2009 to develop faster passenger trains, the projects have gone mostly nowhere and the United States still lags far behind Europe and China.(http://nyti.ms/V3223I)

* The Italian economy shrank in the second quarter, according to an official estimate on Wednesday, taking economists by surprise and provoking concern that violence in Ukraine and tension with Russia could be pushing the broader eurozone back into recession. (http://nyti.ms/1ko5kuk)

* Bitcoin supporters are stepping up the pressure on New York State's top financial regulator to extend the comment period for the state's new virtual currency rules. (http://nyti.ms/1pDiOS2)

* Financial prosecutors in Greece are asking the former head of the central bank there to explain his actions in approving a bank sale to a Greek businessman later jailed on fraud charges. (http://nyti.ms/1y7DuU8)

* The European market for initial public offerings has been on fire this year, with 200 deals raising $58 billion, compared with 89 deals worth $15.2 billion in the same time period a year ago. Rob Leach, BlackRock Inc's head of capital markets for Europe, the Middle East and Africa, recently sent an email to bankers, reminding them that quantity does not equal quality. It was at least his second attempt to address "failing IPOs" this year. (http://nyti.ms/1lCc4Qs)

* Deal-making has boomed this year. So has deal-breaking. So far this year, $428.2 billion of deals have been withdrawn. That is the highest level for this period since 2007, when $566.8 billion of deals were withdrawn. And it far surpasses the level of withdrawn deals for all of 2013, which was $278.5 billion. (http://nyti.ms/1AWqyVi)

Canada

THE GLOBE AND MAIL

* Canada's employment minister Jason Kenny said Ottawa will "vigorously defend" the interests of two Canadian citizens detained in China on spying allegations, and raised concerns about religious freedom in that country. Kenney told reporters the government is providing consular assistance and would work with Chinese authorities on the matter. (http://bit.ly/1oG4ZD3)

* The Conservative Party of Canada is starting from scratch in a Toronto-area riding after a bitter nomination battle led both candidates to drop out. Eve Adams, who is currently an MP in a nearby riding, and chiropractor Natalia Lishchyna have both bowed out of the race to be the Tory nominee in the newly created riding of Oakville North-Burlington. (http://bit.ly/1kKfNAR)

Reports in the business section:

* Canada's pork industry is bracing for a major blow after Russian President Vladimir Putin announced his country will ban the import of agricultural products from countries that have imposed sanctions on Russia. Pork products, including frozen pork, ham, pig fat and offal, are Canada's largest agricultural export to Russia. (http://bit.ly/1u08nMs)

NATIONAL POST

* Hours before assembly of first nations regional chief Jody Wilson-Raybould became a Liberal Party of Canada candidate for the 2015 federal election, Isadore Day, chief of the 1,300-member Serpent River First Nation drafted a complaint criticizing her decision to keep her job until after the election. Day accused Ms. Wilson-Raybould of "clear bias" and "conflict of interest" and demanded "close examination and if necessary, corrective measures."(http://bit.ly/1vef27f)

* Alberta Premier Dave Hancock announced on Wednesday that he will ask the Royal Canadian Mounted Police to review the Auditor General's investigative report into the alleged abuse of Alberta's fleet of planes former Premier Alison Redford resigned as MLA on Tuesday in the wake of scandals connected to her use of the taxpayer-funded aircrafts. (http:/bit.ly/1zWNrGP)

FINANCIAL POST

* Canada may soon be home to another smartphone maker when Moscow-based Yota Devices relocates its headquarters to Toronto or Waterloo by the end of this year. Yota Devices, whose flagship unit is an Android-based smartphone with screens on both sides, is aiming to take advantage of the talent pool in Canada left behind by BlackBerry Ltd in the wake of its restructuring, said CEO Vlad Martynov. (http://bit.ly/1kKk6fu)

* Canada reported the largest merchandise trade surplus in more than two years in June as exports reached a record on gains in crude oil and metals. (http://bit.ly/1uq4TAs)

China

CHINA SECURITIES JOURNAL

- PetroChina Company Limited will accelerate reform, allowing private capital to buy surplus oil under the "first come, first serve" principle, according to an anonymous informed source.

SHANGHAI SECURITIES NEWS

- A total of 100 billion yuan ($16.2 billion) has flowed into China's stock markets, boosting market performance recently.

- The ongoing anti-monopoly investigations into foreign automobile companies is expected to change the structure of the automobile industry in China, the paper said.

CHINA DAILY

- Antitrust probes will be a "default position" in China for foreign companies, an official from the expert advisory group of the State Council's anti-monopoly committee said on Wednesday.

PEOPLE'S DAILY

- China will maintain annual growth of 7.5 percent this year, despite the likelihood that the Asia-Pacific region may experience an economic slowdown, the United Nations Economic and Social Commission for Asia and the Pacific said in a report released on Wednesday.

SHANGHAI DAILY

- Chinese consumers lack confidence in real estate investment, according to the China Wealth Index compiled by the Bank of Communications and Nielsen which was released on Wednesday.

Britain

The Times

BOOTS CHAIRMAN MAKES $11 BILLION FROM WALGREEN DEAL

Alliance Boot's Italian boss Stefano Pessina, who built his family's drugs wholesaling business into a European leader, is $11 billion richer today after presiding over the sale of the drug chain to America's Walgreen.

MANUFACTURING SLOWDOWN RAISES DOUBTS OVER RECOVERY

Britain's rebalancing from consumption to manufacturing may be stalling, economists have warned after official factory output numbers fell short of expectations.

The Guardian

HIGH COURT THROWS OUT 'INCREDIBLE' 6 MLN STG BONUS CLAIM BY EX-INVESTEC TRADERS

Two former Investec traders lost a three-year, 6 million pound ($10 million) battle over their bonuses on Wednesday in a case described by a London high court judge as fanciful and "wholly incredible".

The Telegraph

BBC MUST INTRODUCE QUOTAS ON WEB TRAFFIC SHARING, SAYS JOHNSTON PRESS CHIEF

The BBC must scale back its regional news websites and commit to sharing traffic with commercial publishers, according to the chief executive of Johnston Press, the publisher of the Scotsman and the Yorkshire Post.

THAMES WATER CHALLENGED OVER LONDON SUPERSEWER COSTS

Thames Water has only justified half of its initial spending plans for the London supersewer project, regulator Ofwat has warned, demanding the company provide more information to explain proposals for a further 331 million pound outlay.

Sky News

KELLOGG CRUNCHES NUMBERS ON 2 BLN STG PENGUIN DEAL

American food giant Kellogg is examining a 2 billion pound offer for United Biscuits (UB), the owner of McVitie's, Penguin and other famous British biscuit brands.

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Significant domestic economic reports scheduled for today include:
Jobless claims for week of August 2 at 8:30--consensus 305K
Consumer credit for June at 15:00--consensus $18.3B

ANALYST RESEARCH

Upgrades

21st Century Fox (FOXA) upgraded to Market Perform from Underperform at Cowen
AOL (AOL) upgraded to Buy from Hold at Cantor
Alpha Natural (ANR) upgraded to Neutral from Sell at UBS
Carnival (CCL) upgraded to Buy from Neutral at BofA/Merrill
Chesapeake (CHK) upgraded to Buy from Hold at Stifel
Esterline (ESL) upgraded to Buy from Neutral at Goldman
inContact (SAAS) upgraded to Outperform from Perform at Oppenheimer
Independent Bank (INDB) upgraded to Buy from Neutral at Guggenheim
Ralph Lauren (RL) upgraded to Outperform from Neutral at Credit Suisse
Sportsman's Warehouse (SPWH) upgraded to Outperform from Market Perform at Wells Fargo
Tallgrass Energy (TEP) upgraded to Outperform from Neutral at RW Baird
Team Health (TMH) upgraded to Buy from Hold at Deutsche Bank

Downgrades

Aetna (AET) downgraded to Neutral from Buy at Goldman
Copa Holdings (CPA) downgraded to Equal-Weight from Overweight at Evercore
Copa Holdings (CPA) downgraded to Market Perform from Outperform at Raymond James
Ixia (XXIA) downgraded to Hold from Buy at Jefferies
Nu Skin (NUS) downgraded to Neutral from Overweight at JPMorgan
ReachLocal (RLOC) downgraded to Neutral from Overweight at Piper Jaffray
Thoratec (THOR) downgraded to Neutral from Buy at Goldman
Thoratec (THOR) downgraded to Neutral from Outperform at Credit Suisse
UnitedHealth (UNH) downgraded to Buy from Conviction Buy at Goldman
Vodafone (VOD) downgraded to Market Perform from Outperform at Raymond James

Initiations

Audience (ADNC) resumed with an Outperform at Pacific Crest
Cherry Hill Mortgage (CHMI) initiated with an Outperform at JMP Securities
Michaels Stores (MIK) initiated with a Neutral at Macquarie
Peregrine (PSMI) resumed with a Sector Perform at Pacific Crest
RF Micro Devices (RFMD) resumed with an Outperform at Pacific Crest
Skyworks (SWKS) resumed with an Outperform at Pacific Crest
TreeHouse Foods (THS) resumed with a Neutral at JPMorgan

COMPANY NEWS

21st Century Fox (FOXA) said it will not pursue any other content company and that "we are done" as far as Time Warner (TWX) pursuit
Time Warner (TWX) said in a filing that it will undertake restructuring activities to streamline operations
Hasbro (HAS) CEO announced prostate cancer diagnosis, says he will "continue to enthusiastically fulfill all my responsibilities as Hasbro's President and CEO on a full-time basis with no interruption in my tenure"
GM (GM) issued recall for certain model year SAABs, Trailblazer EXTs, others; Toyota (TM) recalled 2014 Siennas due to defected transmission shift control cable
Costco (COST) reported July SSS up 5%
CST Brands (CST) will acquire the general partner of Lehigh Gas (LGP) for $85M in cash and stock and announced a $200M share repurchase program
VMware (VMW) announced a $1B share repurchase program
Babcock & Wilcox (BWC) announced that it will scale back its Grid business

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
21st Century Fox (FOXA), Symantec (SYMC), Keurig Green Mountain (GMCR), Horizon Pharma (HZNP), Oncolytics Biotech (ONCY), Maximus (MMS), Rand Logistics (RLOG), Teekay (TK), W&T Offshore (WTI), Republic Airways (RJET), Agrium (AGU), Kindred Healthcare (KND), Kronos Worldwide (KRO), Energy Transfer Partners (ETP), Sun Life Financial (SLF), Hill International (HIL), Tronox (TROX), Hillenbrand (HI), Kennedy Wilson (KW), Ares Commercial (ACRE), Sapient (SAPE), Dun & Bradstreet (DNB), ReachLocal (RLOC), InnerWorkings (INWK), Primerica (PRI), Procera Networks (PKT), Providence Service (PRSC), Depomed (DEPO), Concho Resources (CXO), Fleetmatics (FLTX), Sunoco Logistics (SXL), Charles River Labs (CRL), Echelon (ELON), MBIA (MBI), TherapeuticsMD (TXMD), Marin Software (MRIN), NPS Pharmaceuticals (NPSP), XenoPort (XNPT), SandRidge Energy (SD), Transocean (RIG), Pericom (PSEM), Tallgrass Energy (TEP), Triangle Capital (TCAP), PAREXEL (PRXL), Envision Healthcare (EVHC), Intralinks (IL), CenturyLink (CTL), EVERTEC (EVTC), zulily (ZU), 2U (TWOU), inContact (SAAS), Annaly Capital (NLY), Craft Brew (BREW), DexCom (DXCM), Silver Bay Realty (SBY), Tremor Video (TRMR), Jack in the Box (JACK), Bruker (BRKR), Gaiam (GAIA), Andersons (ANDE), Textura (TXTR), Franco-Nevada (FNV), Envestnet (ENV), Prudential (PRU), OraSure (OSUR), Metabolix (MBLX), Portola Pharmaceuticals (PTLA), Silicon Graphics (SGI)

Companies that missed consensus earnings expectations include:
Mylan (MYL), Olympic Steel (ZEUS), Montage Technology (MONT), EMC Insurance (EMCI), Gray Television (GTN), Natural Gas Services (NGS), Lamar Advertising (LAMR), Taminco (TAM), Manulife Financial (MFC), BCE (BCE), Auxilium (AUXL), Dynavax (DVAX), Goodrich Petroleum (GDP), Higher One (ONE), MiX Telematics (MIXT), Teekay Tankers (TNK), Gran Tierra (GTE), Royal Gold (RGLD), Cross Country Healthcare (CCRN), Key Energy (KEG), Xenith Bankshares (XBKS), Alliant Energy (LNT), Coupons.com (COUP), CombiMatrix (CBMX), ION Geophysical (IO), Golden Minerals (AUMN), Essex Rental (ESSX), Westar Energy (WR), Geospace (GEOS), Energy Recovery (ERII), Alamo Group (ALG), US Ecology (ECOL), Energy Transfer Equity (ETE), Vital Therapies (VTL), Coeur Mining (CDE), BioScrip (BIOS), Dynegy (DYN), Global Brass & Copper (BRSS), Trinseo S.A. (TSE), INTL FCStone (INTL), Novavax (NVAX), MYR Group (MYRG), Flotek (FTK), Lehigh Gas (LGP), Novatel Wireless (NVTL), Cenveo (CVO), Babcock & Wilcox (BWC), Compass Diversified (CODI), Entravision (EVC), Actuate (BIRT), ICF International (ICFI), Aerohive Networks (HIVE), Sanchez Energy (SN), Regulus Therapeutics (RGLS), Delta Apparel (DLA), QEP Midstream Partners (QEPM), Molycorp (MCP), Aerie Pharmaceuticals (AERI), TransEnterix (TRXC), UIL Holdings (UIL), CF Industries (CF), Antero Resources (AR), Gulfport Energy (GPOR), Theravance (THRX), Polypore (PPO), Numerex (NMRX), MarkWest Energy (MWE), Nanosphere (NSPH), Cornerstone OnDemand (CSOD), American Water (AWK), Matador (MTDR), Manitex (MNTX), InterMune (ITMN), Cardiovascular Systems (CSII), Roundy's (RNDY)

Companies that matched consensus earnings expectations include:
Mitel (MITL), AES Corp. (AES), Hill-Rom (HRC), Amerco (UHAL), National American University (NAUH), Lumos Networks (LMOS), Atmos Energy (ATO), Maiden Holdings (MHLD), Plains All American (PAA), Exar (EXAR), Tangoe (TNGO), Callon Petroleum (CPE), Neurocrine (NBIX), PennantPark Floating Rate (PFLT), Thoratec (THOR), Celldex (CLDX), Atmel (ATML), Masonite (DOOR), Conversant (CNVR), Measurement Specialties (MEAS), Natures Sunshine Products (NATR), ANADIGICS (ANAD)

NEWSPAPERS/WEBSITES

Bank of America (BAC) near $16B-$17B settlement with DoJ over mortgages, WSJ reports
TIBCO (TIBX) makes informal approach to potential suitors, WSJ reports
Microsoft (MSFT) in talks to open Fifth Avenue store, Daily News reports
Newmont (NEM) CEO says open to merger talks with Barrick Gold (ABX), Reuters reports
Softbank (SFTBF) shifting focus to Sprint (S) turnaround, WSJ reports
Deutsche Telekom (DTEGY) CEO asks for regulators help in spectrum auction, Reuters says
Walgreen (WAG) looks good for long-term investors, Barron's says

SYNDICATE

Aastrom (ASTM) files to sell $20M of common stock
Bonanza Creek (BCEI) files to sell 853,492 shares for holders
Celladon (CLDN) files to sell 4M shares of common stock
Extended Stay America (STAY) 21M share Secondary priced at $21.75
GTx (GTXI) files to sell 22.16M shares for holders
Healthcare Services (HCSG) files to sell 1.01M shares for holders
iDreamSky (DSKY) 7.7M share IPO priced at $15.00
T2 Biosystems (TTOO) 5.2M share IPO priced at $11.00
U.S. Auto Parts (PRTS) files to sell $100M of common stock
UCP, Inc. (UCP) files to sell 10.6M shares for holders
Umpqua Holdings (UMPQ) announces 15M share secondary by selling stockholders
WPX Energy (WPX) files to sell 481,157 shares for holders

• Pope Francis calls for action as Iraqi Christians forced to flee (Reuters)
• Richest Russians Deprived of Luxury Foods by Putin’s Ban (BBG)
• Exxon Drilling Russian Arctic Shows Sanction Lack Bite (BBG)
• Israeli Jets Strike Gaza Targets After Rockets Shatter Truce (BBG)
• U.S. starts aid airdrops in Iraq but no strikes yet (Reuters)
• Banks Said to Be Arranging Argentine Debt Buyer Group (BBG)
• Siberia Flight-Ban Threat Forces Airlines to Mull Options (BBG)
• Malaysia Airlines to Be Delisted in $429 Million Buyout (BBG)
• Erdogan poised to win Turkey's first popular presidential vote (Reuters)
• African Bank Fights Collapse in Espirito Santo-Like Drama (BBG)
• China to build lighthouses on five isles in defiance of U.S. call (Reuters)
• Foreign Investigators Say They Didn’t Know China Law (BBG)
• BlackRock Sees Correction for India Stocks After 20% Gain (BBG)

Overnight Media Digest

WSJ

* President Barack Obama authorized targeted air strikes and emergency assistance missions in northern Iraq, saying the United States must act to protect American personnel and prevent a humanitarian catastrophe in the face of advances by violent Islamist militants. (http://on.wsj.com/X5DN6W)

* A change in how the FICO credit-score, the most widely used credit score in the United States, is tallied will likely make it easier for tens of millions of Americans to get loans. (http://on.wsj.com/1yb8UZM)

* Khazanah Nasional Bhd, Malaysia's state investment company, said it will buy out Malaysian Airline System Bhd as the first step in restructuring the ailing flag carrier hit by the high-profile loss of two of its flights this year. (http://on.wsj.com/1q05RiP)

* The U.S. economy looks set to steadily accelerate after a weather-pummeled first-half crawl, but the most upbeat economists in The Wall Street Journal's monthly forecasting survey say the business sector holds the key to even stronger growth during the second half. (http://on.wsj.com/1mrprmJ)

* Investors pulled a record $7.1 billion from junk-bond funds in the week ended Wednesday. Many investors have been pulling back from the market amid concerns that the bonds are overvalued and a strengthening U.S. economy could prompt the Federal Reserve to raise interest rates sooner than the market currently expects. (http://on.wsj.com/1mrirX0)

* Blackstone Group LP, KKR & Co LP and TPG Capital Management LP agreed to pay a combined $325 million to settle a lawsuit alleging that a number of private-equity firms colluded to keep down the prices they paid for companies. (http://on.wsj.com/1qZuKRU)

* Deutsche Bank AG, under fire from U.S. regulators over what they see as weak systems and financial controls, has been formally ordered to clean up its act as part of a confidential pact with the authorities, according to people familiar with the agreement. (http://on.wsj.com/1oJUtuj)

* MetLife Inc has agreed to pay $23 million to resolve a class-action litigation that accused an agent of the firm of improperly blasting life-insurance pitches via fax machine. (http://on.wsj.com/X5Ehd8)

* The Obama administration is exploring a range of possible weapons in the tax code to try to deter companies from relocating overseas for tax purposes through so-called inversion mergers. (http://on.wsj.com/1q07mNQ)

* International Business Machines Corp said it has developed a microchip that simulates brain functions to perform calculations. IBM says the chip is a sharp break from the fundamental design used in most computers. (http://on.wsj.com/1q088uc)

* Russia's ban on food imports from the United States could trim revenues for producers of almonds, poultry and other agricultural products, though the impact on the U.S. farm sector is expected to be muted overall, industry officials said on Thursday. (http://on.wsj.com/V6EVp1)

* Deutsche Telekom AG Chief Executive Timotheus Höttges said he hasn't received an offer for U.S. subsidiary T-Mobile US that meets his requirements for a deal, as the company reported a rise in second-quarter profit. (http://on.wsj.com/1pYSHT2)

FT

The big U.S. banks may have to shell out billions of dollars more as aid to distressed communities hit by the financial crisis, with the U.S. Department of Justice and the Department of Housing and Urban Development asking for new terms for settling claims of mortgage sales abuses.

Buyout firms KKR & Co LP, Blackstone Group LP and TPG Capital LP have agreed to pay $325 million to settle a U.S. lawsuit that accused them, along with four other private equity firms, of conspiring to fix prices on some of the world's largest leveraged buyout deals.

RSA Insurance Group Plc CEO Stephen Hester has warned shareholders that the insurer might face further asset writedowns, as the company's head tries to rebuild the company following setbacks, most seriously the past overstatement of profits in Ireland.

Norway's sovereign wealth fund will start issuing public declarations from next year, to state which way it intends to vote on issues being presented at certain companies' annual meeting.

Researches at the Black Hat cyber security conference in Las Vegas have drawn attention to flaws in cyber security they believe could allow hackers to swipe credit card information from over 600 retailers and control gadgets in hotel rooms remotely.

NYT

* Chinese companies have raised $3.5 billion in new listings in the United States so far this year, more than the combined total from 2009 to 2013. Up next is Alibaba Group Holding Ltd <IPO-BABA.N>, the Chinese e-commerce giant that is expected to raise as much as $20 billion in one of the biggest IPOs in the history of United States markets, perhaps as soon as September. (http://nyti.ms/1zYU1g3)

* As of earlier this week 909 writers had signed on a letter to Jeff Bezos, chief executive officer of Amazon.com Inc demanding that Amazon stop using writers as hostages in its negotiations. (http://nyti.ms/1ybs2qo)

* Wal-Mart Stores Inc, the United States' largest retailer, is in the throes of its most aggressive push yet to become a one-stop shopping destination for medical care. The company has opened five primary care locations in South Carolina and Texas, and plans to open a sixth clinic in Palestine, Texas, on Friday and another six by the end of the year.(http://nyti.ms/1ovkVnc)

* Inspired by the architecture of the brain, scientists have developed a new kind of computer chip that uses no more power than a hearing aid and may eventually excel at calculations that stump today's supercomputers. The chip, or processor, is named TrueNorth and was developed by researchers at IBM. (http://nyti.ms/1shS5Os)

* The creator of one of the most widely used and influential credit scores, Fair Isaac Corp, said on Thursday that the latest version of its score would no longer weigh medical debts, which account for about half of all unpaid collections on consumers' credit reports as heavily as it did in previous iterations. (http://nyti.ms/1nxOKTT)

* China lost an appeal on Thursday of a World Trade Organization ruling that found it had broken international trade law by restricting exports of raw materials used in hybrid car batteries and other energy-efficiency products. (http://nyti.ms/1kqbxpC)

* The Food and Drug Administration helped clear the way on Thursday for a second experimental drug to be tried by people in Africa stricken with the Ebola virus. The drug, being developed by Tekmira Pharmaceuticals Corp, was in the initial phase of human testing, which is on healthy volunteers, when the FDA last month halted the trial because side effects were observed. (http://nyti.ms/1sCXhKw)

* Federal auto regulators imposed a nearly $17.4 million penalty on Hyundai because it did not promptly report to the public a safety defect that affected braking in its cars. (http://nyti.ms/1lFOSB5)

* Santander Consumer USA disclosed on Thursday that it had received a Justice Department subpoena related to its subprime auto lending business, the latest company to be touched by a federal investigation into the booming industry. (http://nyti.ms/1r41Vzg)

* Three of the leading private equity firms, Kohlberg Kravis Roberts & Co LP, the Blackstone Group LP and TPG on Wall Street have agreed to pay a combined $325 million to settle accusations that they colluded with one another to drive down the prices of corporate takeover targets, according to a court filing on Thursday. (http://nyti.ms/1ohYG9W)

* Lululemon Athletica Inc has reached a pact with its founder, Dennis Wilson, potentially averting a costly battle over control of the embattled sportswear maker's board. The agreement ends a months long standoff between the high-end yoga clothing firm and its founder, one in which Wilson publicly voiced his dissatisfaction by voting against the reappointment of two of his fellow directors. (http://nyti.ms/1nxCpix)

* The owner of SourceMedia, the publisher of financial trade publications like American Banker and The Bond Buyer, said that it had sold the media company to Observer Capital, an investment firm. Terms of the transaction weren't disclosed. (http://nyti.ms/1vj56JN)

Canada

THE GLOBE AND MAIL

* Canadian businesses are bracing for a possible next wave of Russian sanctions after Moscow banned imports of key food products in an escalating economic war over the conflict in Ukraine. (http://bit.ly/1qZNr8h)

* The water quality near the site of the massive tailings-pond breach this week meets drinking-water standards, according to preliminary test results, but the long-term impact on fish habitats and other wildlife remains unknown. A water usage ban will remain in place until additional testing is completed. The tailings-pond dam at Imperial Metals' Mount Polley mine burst early Monday morning, spewing millions of cubic meters of mining waste into the Cariboo district's waterways and triggering a local state of emergency. (http://bit.ly/1mskcmU)

Reports in the business section:

* After a months-long battle, Lululemon Athletica Inc founder Chip Wilson has reached an agreement with the yoga wear retailer's board that will see him team up with a private equity firm to get more sway over the board. (http://bit.ly/V5VvoT)

NATIONAL POST

* Canada is sending non-lethal military equipment to Ukraine to help the country protect its eastern border against Russian aggression. Defense Minister Rob Nicholson made the announcement at a military base in Trenton, Ontario, where a CC-130J Hercules plane loaded with "non-kinetic military equipment" was set to take off for the first in a series of military transport flights. (http://bit.ly/V3cV5Q)

* Municipal politicians in a region of Ontario that is home to one of the world's largest nuclear power plants violated provincial law by holding secret meetings over the storage of radioactive waste, an outside investigation has found. (http://bit.ly/1oitwPU)

FINANCIAL POST

* Oil exploration off Canada's East Coast is reaching fever pitch as oil companies warm up to the potential beneath the frigid waters near Newfoundland and Labrador and the Maritimes. TGS-NOPEC Geophysical Company ASA has teamed up with Petroleum Geo-Services ASA and Newfoundland and Labrador's Nalcor Energy to map about 47,000 square kilometers of seismic data. (http://bit.ly/1pg2bwZ)

* Manulife Financial Corp surprised investors by hiking its dividend for the first time since slashing it in half five years ago, in a bid to survive the toil of the financial crisis. (http://bit.ly/1qZP5qg)

China

CHINA SECURITIES JOURNAL

- China's Chongqing has become the first provincial level government to test public-private partnership (PPP) in the country's state-owned enterprise reform, signing contracts worth 100 billion yuan ($16 billion) under the model on Thursday.

- Foreign investors have stepped up their investment in China's stock market since the start of July as the market shows signs of recovery while the yuan is slowly appreciating, adding value to the assets denominated in the Chinese currency.

SHANGHAI SECURITIES NEWS

- Investment in trust products by Chinese insurance companies surged by 38.5 percent from the end of last year to 200 billion yuan by the end of the first quarter this year, alarming the China Insurance Regulatory Commission, which is launching an investigation into the unusual rise.

- The Shanghai government has issued new rules to support Internet finance in the fledging stage in China, including offering fund-raising support to related companies.

CHINA DAILY

- Food companies should withdraw substandard products that are a threat to health as soon as they are discovered, a draft document by China's top food safety watchdog said after a slew of food scandals involving Chinese chain shops of big names such as McDonald's Corp and Yum Brands Inc.

PEOPLE'S DAILY

- The upholding by the High People's Court in central Hubei province of the death sentence for Liu Han, a former mining tycoon, means China will not tolerate Mafia-like gangs, the newspaper, the mouthpiece of the ruling Communist Party of China, said in a commentary.

Britain

The Times

BILL FOR 16,000 STG OF CIGARS SPARKS DIPLOMATIC SQUABBLE

Diplomats have this year spent more than 16,000 pounds with cigar suppliers as part of an overall 400,000 pounds entertainment bill for items including pianos and exclusive restaurants.

STANDARD CHARTERED QUICK TO DISOWN CHIEF'S INCENDIARY REMARK OVER FINES

Standard Chartered Plc has moved to distance itself from criticism by one of its most senior executives after he attacked regulators for treating the bank like a "criminal" over lapses in its anti-money laundering systems.

NEC GROUP SET FOR SALE AFTER STRONG PERFORMANCE

Birmingham city council will sell its conference arena operator by the end of this year after NEC Group reported a sharp rise in profits.

The Guardian

CO-OPERATIVE GROUP SET TO OFFER CONCESSIONS ON BOARD STRUCTURE

The Co-operative Group is on Friday expected to publish detailed proposals to change the way it is run and is thought to be offering crucial concessions on its board structure.

PENSION SHAKEUP COULD NET 4 BLN STG UK TAX WINDFALL

The government stands to reap a 4 billion pound ($6.7 billion) tax windfall as more than 650,000 people are expected to exploit George Osborne's changes and cash in part of their pensions over the next five years.

ADIDAS LOOKS TO OUTRUN NIKE WITH ITS BIGGEST ADVERTISING CAMPAIGN EVER

Adidas AG is planning its biggest-ever advertising campaign next year as it fights back against rival Nike Inc. The world's second-largest sportswear maker has admitted that it needs to invest more in its brands to catch up with market leader Nike, after losing ground in developed markets.

The Telegraph

SOARING POUND WIPES 1.5 BLN STG OFF UK PLC PROFITS

The soaring pound is savaging corporate Britain, with more than 1.5 billion pounds wiped off the year-to-date profits of a string of top multinationals in recent days.

ROSETTA MISSION TO 67P COMET DEPENDS ON UK COMPANIES

British industry is heavily involved in the success of the European Space Agency's (ESA) mission to catch and land on the 67P/Churyumov-Gerasimenko comet.

Sky News

JEWELLERY TYCOON SURI TO BECOME TORY PEER

Ranbir Singh Suri, the founder of Oceanic Jewellers who ranks among Britain's richest Asians, is to be ennobled by David Cameron when nearly two dozen new members of the House of Lords are confirmed on Friday.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS
Significant domestic economic reports scheduled for today include:
Nonfarm productivity for Q2 at 8:30--consensus up 1.4%
Unit labor costs for Q2 at 8:30--consensus up 1.2%
Wholesale trade inventories for June at 10:00--consensus up 0.7%

ANALYST RESEARCH

Upgrades

Allergan (AGN) upgraded to Outperform from Market Perform at Leerink
Brinker (EAT) upgraded to Outperform from Market Perform at Raymond James
CST Brands (CST) upgraded to Neutral from Underperform at Credit Suisse
Coca-Cola HBC (OCCH) upgraded to Buy from Hold at Deutsche Bank
Delek US (DK) upgraded to Outperform from Market Perform at Cowen
Fifth Street Finance (FSC) upgraded to Buy from Neutral at Guggenheim
Glimcher Realty Trust (GRT) upgraded to Buy from Neutral at BofA/Merrill
NVIDIA (NVDA) upgraded to Buy from Hold at Needham
POZEN (POZN) upgraded to Buy from Hold at Ascendiant
Sierra Bancorp (BSRR) upgraded to Outperform from Market Perform at Raymond James
Tornier (TRNX) upgraded to Outperform from Market Perform at BMO Capital
WGL Holdings (WGL) upgraded to Buy from Hold at Brean Capital

Downgrades

Alexza Pharmaceuticals (ALXA) downgraded to Neutral from Buy at Roth Capital
Ann Inc. (ANN) downgraded to Neutral from Buy at UBS
Ball Corp. (BLL) downgraded to Neutral from Buy at Citigroup
Braskem (BAK) downgraded to Neutral from Overweight at HSBC
Cambrex (CBM) downgraded to Equal Weight from Overweight at First Analysis
Delta Apparel (DLA) downgraded to Hold from Buy at Ascendiant
Endurance (EIGI) downgraded to Neutral from Buy at Goldman
Hibbett Sports (HIBB) downgraded to Underperform from Neutral at Credit Suisse
Ignite downgraded to Underperform from Market Perform at Raymond James
Kraton Performance (KRA) downgraded to Neutral from Buy at UBS
Laredo Petroleum (LPI) downgraded to Neutral from Buy at SunTrust
Marrone Bio (MBII) downgraded to Neutral from Outperform at RW Baird
Marrone Bio (MBII) downgraded to Neutral from Overweight at Piper Jaffray
Masimo (MASI) downgraded to Neutral from Overweight at Piper Jaffray
Mylan (MYL) downgraded to Sector Perform from Outperform at RBC Capital
PhotoMedex (PHMD) downgraded to Hold from Buy at Canaccord
Post Holdings (POST) downgraded to Neutral from Buy at SunTrust
Rubicon (RBCN) downgraded to Neutral from Overweight at JPMorgan
Tronox (TROX) downgraded to Neutral from Buy at B. Riley
Volcano (VOLC) downgraded to Perform from Outperform at Oppenheimer

Initiations

Ashland (ASH) initiated with a Buy at UBS
BioCryst (BCRX) initiated with an Overweight at JPMorgan
Caesarstone (CSTE) initiated with a Buy at UBS
Nimble Storage (NMBL) initiated with an Outperform at Wells Fargo
Proofpoint (PFPT) initiated with an Outperform at Wells Fargo

COMPANY NEWS

lululemon (LULU) founder Chip Wilson to sell half his stake to Advent for $845M. Advent will receive two board seats and review the company's governance
Santander Consumer (SC) disclosed a DOJ subpoena in 10-Q filing
Caesar's (CZR) filed a complaint against investors for thwarting restructuring efforts
T-Mobile (TMUS) plans to overtake Sprint (S) in total customers by end of year, CEO says
Tekmira Pharmaceuticals (TKMR) announced that the FDA verbally confirmed they have modified the full clinical hold placed on the TKM-Ebola to a partial clinical hold
Post Holdings (POST) said it acquired American Blanching for $128M in cash
CBS (CBS) boosted its share buyback to $6B, increased dividend 25%. CEO Moonves said 'happy' with assets, not interested in buying CNN

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
CBS (CBS), RadNet (RDNT), Magna (MGA), eLong (LONG), Consolidated Edison (ED), Assured Guaranty (AGO), Therapeutics (GALT), Alimera Sciences (ALIM), ImmunoCellular (IMUC), Oplink Communications (OPLK), Aeterna Zentaris (AEZS), Universal Display (OLED), Ziopharm (ZIOP), Shutterstock (SSTK), Achillion (ACHN), Demand Media (DMD), Alexza Pharmaceuticals (ALXA), Universal Electronics (UEIC), Medifast (MED), Rentrak (RENT), Main Street (MAIN), Engility Holdings (EGL), Sprouts Farmers Markets (SFM), Rubicon (RBCN), EMCORE (EMKR), Alexander & Baldwin (ALEX), MercadoLibre (MELI), SolarCity (SCTY), Power Solutions (PSIX), Volcano (VOLC), NMI Holdings (NMIH), Cara Therapeutics (CARA), Lionsgate (LGF), Arista Networks (ANET), Navigators (NAVG), Encore Capital (ECPG), Air Lease (AL), NVIDIA (NVDA), CareFusion (CFN), VIVUS (VVUS), CSC (CSC), Genomic Health (GHDX), Northern Oil and Gas (NOG), Century Communities (CCS), Air Methods (AIRM), Anacor (ANAC), Amarin (AMRN), Guidance Software (GUID), Diodes (DIOD), OncoGenex (OGXI), Rentech Nitrogen (RNF), Amyris (AMRS), Monster Beverage (MNST), Amicus Therapeutics (FOLD), Ubiquiti Networks (UBNT), Haynes (HAYN), Spectrum (SPPI), NIC Inc. (EGOV)

Companies that missed consensus earnings expectations include:

News Corp. (NWSA), LSB Industries (LXU), Susser Petroleum Partners (SUSP), The New Home Company (NWHM), Atlas Resource Partners (ARP), Denison Mines (DNN), TransAtlantic Petroleum (TAT), Atlantic Power (AT), Cardica (CRDC), Sophiris Bio (SPHS), BioDelivery Sciences (BDSI), Hanger  (HGR), Multi-Fineline (MFLX), Great Plains Energy (GXP), Future Fuel (FF), BioAmber (BIOA), Speed Commerce (SPDC), Fidus Investment (FDUS), Darling (DAR), BIOLASE (BIOL), AuRico Gold (AUQ), Erickson (EAC), Raptor Pharmaceuticals (RPTP), Ensign Group (ENSG), Capstone Turbine (CPST), Summit Midstream (SMLP), Redwood Trust (RWT), Amtech Systems (ASYS), Kemper (KMPR), Kythera (KYTH), Bonanza Creek (BCEI), Global Eagle (ENT), SMART Technologies (SMT), Tornier (TRNX), Annie's (BNNY), FXCM (FXCM), Auspex Pharmaceuticals (ASPX), Fairway Group (FWM), Central Garden & Pet Co. (CENTA), Frank's International (FI), Performant Financial (PFMT), TrueCar (TRUE), , Masimo (MASI), Marrone Bio (MBII), NeoPhotonics (NPTN), Salix (SLXP), Nuverra Environmental (NES), I.D. Systems (IDSY), Tumi (TUMI), Artesian Resources (ARTNA), Ignite Restaurant (IRG), Alnylam (ALNY)

Companies that matched consensus earnings expectations include:

Zynga (ZNGA), Select Medical (SEM), BPZ Resources (BPZ), Verastem (VSTM), Bankrate (RATE), Bright Horizons (BFAM), Quantum (QTWW), Clean Energy (CLNE), TearLab (TEAR), Hercules Technology (HTGC), Allscripts (MDRX)

NEWSPAPERS/WEBSITES

Dresser-Rand (DRC) receives takeover interest, hires adviser, Bloomberg reports
Royal Bank of Scotland's (RBS) Hampton leads race to become new GSK (GSK) chair, FT reports
Pfizer (PFE) facing wave of lawsuits by women over Lipitor, Reuters reports
Yahoo (YHOO) to strengthen email encryption for users, Mashable reports
Goldman Sachs (GS), JPMorgan (JPM) in Senate's crosshairs for commodities holdings, Reuters reports
The Medicines Co. (MDCO) could have 25% upside, Barron's says

SYNDICATE

Amarin (AMRN) files $300M mixed securities shelf
Camden Property (CPT) files automatic mixed securities shelf
Gold Standard Ventures (GSV) announces 10M common share offering
Green Bancorp (GNBC) 4.688M share IPO priced at $15.00
Spirit AeroSystems (SPR) 8.56M share Spot Secondary priced at $35.90

CNBC reports" Why some investors think oil's bull run is done", as excerpted:

The crude oil market has seen dramatic spikes starting with the Arab Spring in 2010 and continuing into this past June, but some investors are betting that the bull market for oil is over. "We had a situation in oil where we were in a prolonged bull market," Stephen Schork, editor of the Schork Report, told CNBC's "Futures Now," pointing out that oil started the year at $89.09 and rallied to $106.64 during the worst of the headlines out of Iraq. But he said he thinks the bull run has peaked.

"As my mentor ... taught me 15 years ago: good news, bad action," Schork said. "That is to say, the Iraq news was supposed to be good for the bull ... but instead, that trend ended shortly after—a clear tell-tale that the bull market has run its course," he said.

Crude inventories rose 1.4 million barrels last week, according to Department of Energy. That added more downward pressure on domestic benchmark West Texas Intermediate, which dropped below $97 immediately after the release of Wednesday's report. It was still trading below $97 on Thursday.

Domestic crude prices have dropped almost 4 percent in the last month and roughly 10 percent from recent highs, as traders have shrugged off geopolitical concerns and focused more on the supply-demand equation both in the United States and globally.

In fact, the International Energy Agency said Tuesday that the global market is well supplied, citing OPEC production hitting a 5-month high in July as one reason.

Looking at the historical price of oil, one can't help but notice a dramatic short opportunity right after the pop of the last economic bubble.

If one believes the central bank's bubble blowing activities teaming up with an glut have created a similar elixir for downside then you can use Veritaseum's UltraCoin client to monetize that view in near real time, without opening up a futures account or going through a conventional exchange. Download the client appropriate for your OS (Android is coming soon) as well as the quick start tutorial. 

Open the client in "Live Mode" and load it with bitcoin, then search for contracts that you may want to take the other side to. If you don't find any, then populate the fiels with amount you want to put at risk (principal) and in the "Recieve" field put US dollars (ticker is USD=x) and "Pay" field you should put the "iPath S&P GSCI Crude Oil TR Index ETN" (ticker=OIL). This effectively gives you a short position on that crude oil index.

Of course, if you're bullish, you can simpy hit the "switch" button to reverse the exposures into a long position.

Below is a small sampling of the 2,061 oil related indices that can be used:

This trade can be done with futures as well as indices. Below is a small sample of the 1900 futures that can be used.

If you're really feeling creative, you can even use ETFs, of which 91 oil related options are available:

For those that are extremely bearish, you can use these ETFs to build implied leverage into your trade. While not recommended for longer term trades (due to decay, read the prospectuses very carefully and you will see what I mean) short to medium term trades whose hypothesis are successfully executed can be rewarding.  Let's use the PowerShares DB Crude Oil Double Shrt ETN (ticker = DTO) as an example, wherein you actually want to recieve teh DTO exposure (because that is giving you 2x short exposure to oil, and pay USD.

Now, are you even more Uber-bearish than this? Well, use your Ultra-Coin.com financial engineering chops and increase the leverage even more by recieving two times the oil short and paying 1x long. You do this by, again, recieving the DTO value stream, but paying an oil stream, say the index which we initially quoted, "OIL".

For those with true balls of steel, you can attain 4x leverage to the short side by recieving 2x short value streams and paying 2x long values streams. Remember my warnings on decay, though. From the Proshares Ultra Long Oil page:

This Ultra ProShares ETF seeks a return that is 2x the return of an index or other benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor their holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus.

» Considerations for Geared Investing- See more at:http://www.proshares.com/funds/uco.html#sthash.qR6O5U28.dpuf

To set this trade up in UltraCoin, I would use both Proshares Ultra Oil leveraged products, so recieve (long) the Ultra Short Oil and pay (short) the Ultra Oil. It should look like this:

 To produce a 4x leveraged long position, simply click the "switch" button and click new order. 

Now, this is power in trading!!!

Again, I dare... No, I double dare any client of Goldman, Morgan Stanley, Merrill Lynch or JP Morgan to match the power, flexibility, safety, price or transparency of this system. Do you muppets (reference Goldman Sachs 'muppet' trader says unsophisticated clients targeted -'Getting an unsophisticated client was the golden prize,' Greg Smith tells CBS News' 60 Minutes'Getting an unsophisticated client was the golden prize,' Greg Smith tells CBS News' 60 Minutes) really think that bitcoin is a scam and the overpriced services you're getting from banks are the real deal? Well, I said, and I'll say it again... You'be been had!  You've been took! You've been hoodwinked! Bamboozled! Led astray! Run Amok! This is what they do!

Reference BitLicense Part 4: Fact- Bank Product Prices Rise Faster Than Income & ALL Other Expenses, Fact- UltraCoin Can Drop Bank Product Prices Dramatically

Well, here, we will clearly and succinctly demonstrate exactly how much that 'inevitable "robbing" of the consumer by entities that are essentially protected by regulation and seemingly immune to technological progress actually costs over time in two very simple, but information-packed charts....

 As you can see from the chart above, banking products and services pricing has outstripped every consumer staple in price appreciation since the 1997 base year sans the two year period where the US put over $1 trillion in bailout aid into the industry (which essentially makes the services even more expensive, during said period, to the tax paying, savings orientated consumer)!

The chart above illustrates how banking product pricing growth rates outstrip income growth rates when inflation adjusted and normalized.

The article will illustrate how to mitigate bitcoin market risk in your trades...

• Yellen Dashboard Warning Light Glows as Millions Work Part Time (BBG)
• More US drones boosting global GDP: Unidentified war planes, explosions heard in Libyan capital (Reuters)
• London Home Asking Prices Plunge Most in More Than Six Years (BBG)
• No Fed fireworks, but plenty of clues, expected at Jackson Hole (Reuters)
• Kurdish, Iraqi forces in control of Mosul dam (Reuters)
• China Pushes Cleanup of Banks (WSJ)
• Russia Widens Ruble Trading Band in Move Away From Managed Rate (BBG)
• Dollar General Makes $9.7 Billion Family Dollar Counterbid (BBG)
• Carney - Rate Hike before Pay Recovers (Times)
• Autopsy finds unarmed teen killed by police was shot six times (NYT)
• Bull Market Waning as Barclays Sees 1% Gain for S&P 500 (BBG)
• Credit Suisse Caught Up in Espírito Santo Mess (WSJ)
• White House meets with big biz on immigration (Politico)
• Don’t Hike Alone Is Jackson Hole Bear Warning for Central Banks (BBG)
• WikiLeaks' Julian Assange hopes to exit London embassy if UK lets him  (Reuters)
• Big Investors Snap Up Junk Bonds (WSJ)
• Ex-SAC Executive Kumin's Hedge-Fund Firm Gets Leucadia Investment (WSJ)

Overnight Media Digest

WSJ

* U.S. jets, drones and bombers pounded Sunni insurgent positions on Sunday to ease the siege of the strategically vital Mosul Dam, as Washington and its Kurdish allies turned up pressure on the radical group Islamic State. (on.wsj.com/1BrVg8W)

* A march protesting the shooting death of an unarmed 18-year-old black man by a white officer here erupted in chaos Sunday night when police forced back demonstrators in a cloud of smoke. The retreat by marchers set off widespread vandalism and shots were fired, but it wasn't known by whom. Several storefront windows were shattered along West Florissant Avenue, a main thoroughfare in Ferguson. (on.wsj.com/1tdPwLp)

* China denied on Monday that a spate of recent antitrust probes into foreign companies could be responsible for falling levels of investment in the country, after data showed that foreign direct investment in China fell 17 percent in July compared with a year earlier. (on.wsj.com/1uL9EYg)

* Sonic Automotive Inc will open a chain of preowned-vehicle stores hoping to move on the turf of used-car retailer CarMax Inc. Sonic on Monday will announce the creation of EchoPark stores, with the first dealership opening in Denver, a few miles from a CarMax store. (on.wsj.com/VycKzu)

* Across the United States, small-business lending has been stuck in a slow, grinding recovery behind most other types of business and consumer loans. At the end of the first quarter, banks held $585 billion in loans to small businesses, up 1 percent from last September but still 18 percent less than the peak of $711 billion in 2008, according to the Federal Deposit Insurance Corp. (on.wsj.com/1o3T7pP)

* Many economists fear the U.S. Federal Reserve will wait too long before raising interest rates, but officials believe markets and economic indicators are not signaling an economy near overheating. (on.wsj.com/1oIeiDV)

* Institutions are taking advantage of a recent slide in high-yield bonds' price triggered by small investors' selling-figuring the bonds are still a good bet as the economy expands. (on.wsj.com/1kN0g2Q)

* Former SAC Capital Advisors LP executive Solomon Kumin has secured a $400 million investment from Leucadia National Corp for his startup hedge-fund firm, according to people familiar with the recent developments. (on.wsj.com/1mab1Yy)

* Credit Suisse Group AG helped sell billions of dollars of securities that ultimately played a role in toppling Portugal's second-largest bank. The Swiss bank was responsible for putting together securities that were issued by offshore investment vehicles and then sold to retail customers of Portugal's Banco Espirito Santo SA. (on.wsj.com/1rhvsKC)

* As the Federal Communications Commission reviews Comcast Corp's proposed acquisition of Time Warner Cable Inc one issue it has to decide is whether to allow Comcast to continue TWC's long-standing arrangement to handle programming and technology acquisitions for the sixth-biggest cable operator, Bright House Networks. (on.wsj.com/1uL8n3i)

* PricewaterhouseCoopers will pay $25 million and be banned for two years from some consulting work to settle New York state regulators' allegations that the accounting firm mishandled its work for Bank of Tokyo-Mitsubishi UFJ. The New York State Department of Financial Services alleges that PwC watered down an anti-money-laundering report it did for the Japanese bank that was submitted to regulators. (on.wsj.com/1mZTaUf)

* The Justice Department on Friday filed additional charges against FedEx Corp, accusing it of conspiracy to launder money, in connection with its prescription-drug case against the package-delivery concern. (on.wsj.com/1vZrico)

FT

Some Wall Street banks are drawing up preliminary plans that include moving some of their London-based operations to Ireland to deal with the possible scenario of Britain leaving the European Union.

Bank of England Governor Mark Carney said he will not necessarily wait for real wages to turn positive before raising interest rates.

European banks are expected to borrow about 250 billion euros ($334.75 billion) in cheap four-year money from the European Central Bank in September and December, according to projections by Morgan Stanley.

Shareholders in BHP Billiton and Glencore, two of the world's largest mining companies, could hear this week when surplus capital will be returned to them, in what would mark a milestone in the mining sector's recovery.

A British government report on Egypt's Muslim Brotherhood has been delayed as ministers and officials disagree over its findings.

Private equity firms Blackstone and TPG are close to buying the UK subprime mortgage lender Kensington from Investec Ltd, the Anglo-South African financial services group.

NYT

* PricewaterhouseCoopers has agreed to pay a $25 million penalty imposed by the New York State's financial regulator, taking aim at the consulting firm for watering down a report about one of the world's biggest banks, Bank of Tokyo-Mitsubishi UFJ. The settlement also includes prevention of one of its consulting units from taking on certain assignments from New York-regulated banks for two years.(http://nyti.ms/YmBhtn)

* More than 1,000 writers from Germany, Austria and Switzerland have united to vent their frustration over the tactics Amazon.com Inc is using against the Bonnier Group and the authors who are published under its name. (http://nyti.ms/1o3Lsrz)

* Companies like Google Inc, Facebook Inc and Cisco Systems Inc are employing unorthodox criteria - say, whether a product is used daily, like a toothbrush - to size up their deal targets, and they are handling most acquisitions internally instead of relying on Wall Street bankers. (http://nyti.ms/YmZsaZ)

* The "Ice Bucket Challenge," a campaign to raise money to fight Lou Gehrig's disease, has caught fire on social media, with celebrities drenching themselves in ice water. (http://nyti.ms/1pVpXgQ)

Canada

THE GLOBE AND MAIL

* The British Columbia government says an independent investigation into the Mount Polley spill is needed, and the province is indicating there could also be new inspections at other mines. It said the communities in the affected areas, First Nations, industry and other British Columbians "deserve to know in a clear and timely way what happened and what can be done to ensure such incidents never happen again." (http://bit.ly/1pEfwzc)

* About 200 kilometres before an ill-fated oil train was left idling on the main track near Lac-Megantic, Quebec, Transport Canada conducted a routine inspection and allowed it to proceed. The inspector didn't report any concerns about the engine in the train's lead locomotive. The Globe and Mail has learned that part of the federal investigation into the rail disaster focused on a repair conducted nine months earlier that played a role in a series of events that led to the train's derailment and explosion in Lac-Megantic, Quebec. (bit.ly/1kNECvl)

Reports in the business section:

* Chinese companies have shelled out more than $30 billion in Canada's energy industry, but many of those investments have been hit with operational problems, delays and weak returns, leading to growing impatience in some quarters in China. PetroChina Co Ltd, Sinopec , CNOOC Ltd, China Investment Corp and other state-owned enterprises made a raft of big bets on oil sands projects, shale developments and domestic companies since 2005 and many have yet to pay off. (http://bit.ly/1px0jQj)

NATIONAL POST

* Federal officials closely tracked the fallout of a Royal Canadian Mounted Police raid on a First Nations protest against shale-gas exploration in New Brunswick. At one point, the protests raised concerns it could spawn another countrywide movement like "Idle No More." Members of the Elsipogtog First Nation, who were concerned about the environmental impact of shale-gas development, didn't want energy company SWN Resources to do testing work on their traditional territory. (http://bit.ly/1lcBv0D)

* Three groups representing doctors say they will not take part in an anti-drug campaign by Health Canada that will target young people because it has become a political issue. A statement issued on Saturday by the College of Family Physicians of Canada, Canadian Medical Association and Royal College of Physicians and Surgeons of Canada says they were invited to be involved in the campaign. It says the groups "did not, and do not, support or endorse any political messaging or political advertising on this issue." (http://bit.ly/VyGVXf)

FINANCIAL POST

* CTV has made deep cuts to its flagship newsmagazine show W5, blaming falling advertising revenue and changing viewer habits. Bell Media Inc, which runs CTV, said that seven contract positions on the production team at W5 were not renewed. As a result, the network is trimming the number of episodes it will air this season to 14 from the usual 23. (http://bit.ly/1kNAtrl)

* Beleaguered miner Imperial Metals Corp plans to issue $100 million of convertible debt to help fund the cleanup of its stricken Mount Polley mine and finish building its new Red Chris operation, both in British Columbia. (http://bit.ly/Vya7Ov)

China

- Several domestic banks in Shanghai, including Bank of China Ltd, China Construction Bank Corp, Industrial and Commercial Bank of China Ltd and Agricultural Bank of China Ltd, denied that they had lowered interest rates on property loans, sources told the newspaper.

- Total revenues of China's 838 listed companies reached 2.23 trillion yuan ($362.78 billion), up 8.9 percent from a year ago, according to the newspaper's calculations.

CHINA DAILY

- Despite recent progress, China' antitrust team lacks real enforcement capability, especially when challenging dominant state-owned enterprises, due to a shortage of manpower, legal experts say.

- China is keen to export technology and equipment to the United States to take part in its upgrading of transport infrastructure, Premier Li Keqiang said while meeting a U.S. delegation on Saturday.

SHANGHAI SECURITIES NEWS

- Almost 3,000 small and medium enterprises (SMEs) have expressed interest in listing on China's SME board, the newspaper said.

Britain

The Times

BANKS 'ABUSED' LOAN GUARANTEE FOR FIRMS

The Serious Fraud Office is examining allegations that government schemes designed to increase lending to small businesses have been abused by high street banks.

CARILLION PLANS FURTHER TILT AT BALFOUR BEATTY

The board of Carillion is weighing up options to sweeten its proposal for a 3 billion pound merger with Balfour Beatty.

The Guardian

INTEREST RATES WILL RISE BEFORE REAL PAY STOPS FALLING, SAYS CARNEY The Bank of England governor says the economy is halfway there, but the most difficult part of the UK's recovery lies ahead

The Telegraph

'GET NEW INDEPENDENT DIRECTORS AT BETFAIR', SAYS PENSION FUND

The Local Authority Pension Fund Forum (LAPFF) has called for "new independent directors" to be appointed to investigate the Betfair's dividend payments over the past three years and the role of its directors and auditors, KPMG.

Sky News

WALL STREET GIANTS SWOOP ON SUB-PRIME LENDER

Blackstone and TPG, the U.S.-based private equity groups, are close to securing a takeover of sub-prime mortgage lender Kensington, which is owned by the Anglo-South African financial services provider Investec.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Housing market index for August at 10am -- consensus 53.0

ANALYST RESEARCH

Upgrades

Equity Residential (EQR) upgraded to Hold from Underperform at Jefferies
HMS Holdings (HMSY) upgraded to Overweight from Equal Weight at First Analysis
Halcon Resources (HK) upgraded to Buy from Hold at MLV & Co.
KapStone (KS) upgraded to Buy from Hold at Deutsche Bank
Sportsman's Warehouse (SPWH) upgraded to Outperform from Neutral at RW Baird
WisdomTree (WETF) upgraded to Neutral from Sell at Citigroup

Downgrades

Arrow Electronics (ARW) downgraded to Neutral from Buy at Goldman
Constellium (CSTM) downgraded to Neutral from Outperform at Credit Suisse
Federal Realty (FRT) downgraded to Hold from Buy at Jefferies
InvenSense (INVN) downgraded to Neutral from Buy at Goldman
Liberty Ventures (LVNTA) downgraded to Sell from Neutral at Citigroup
Monster Beverage (MNST) downgraded to Hold from Buy at Jefferies
NXP Semiconductors (NXPI) downgraded to Sell from Neutral at Goldman
Werner (WERN) downgraded to Underperform from Neutral at BofA/Merrill

Initiations

Descartes Systems (DSGX) initiated with an Overweight at Barclays
Immune Design (IMDZ) initiated with a Buy at Jefferies
Intersect ENT (XENT) initiated with an Overweight at Piper Jaffray
Pfenex (PFNX) initiated with a Buy at Mizuho
Pfenex (PFNX) initiated with an Outperform at JMP Securities
Pfenex (PFNX) initiated with an Outperform at William Blair
Semiconductor Manufacturing (SMI) initiated with an Overweight at Barclays
Synergy Resources (SYRG) initiated with a Buy at Canaccord
Townsquare Media (TSQ) initiated with a Buy at BofA/Merrill
Townsquare Media (TSQ) initiated with a Buy at Jefferies
Townsquare Media (TSQ) initiated with an Outperform at RBC Capital

COMPANY NEWS

Dollar General (DG) offers to acquire Family Dollar (FDO) for $78.50 per share
Sensata (ST) to acquire Schrader International for $1B
Tesla (TSLA) announced increase to Model S drive unit warranty, said change to have 'moderately negative' impact on earnings in the short-term
Rio Tinto (RIO) to review options in Bougainville Copper Limited
Yahoo (YHOO) acquired Israel-based ad startup ClarityRay, terms not disclosed

EARNINGS

Fuel Systems (FSYS) sees FY14 revenue $335M-$355M, consensus $347.13M
FS Investment (FSIC) reports Q2 adjusted net investment income 26c, consensus 24c

NEWSPAPERS/WEBSITES

U.S. banks (BAC, C, MS) making plans for U.K. exit from EU, FT reports
Apache (APA) discovers oil field in Western Australia, WSJ reports
FCC must decide on Time Warner Cable (TWC) arrangement as it reviews Comcast (CMCSA) deal, WSJ says
Icahn's recent stake in Gannett (GCI) should reassure investors, Barron's reports
BB&T (BBT), Juniper (JNPR), ConocoPhillips (COP), United Technologies (UTX) look discounted, Barron's says
Mick Davis in talks to buy Colombia's CNR from Goldman (GS), Sunday Times reports
McDonald's (MCD) orders products from Thai supplier after food scare, Reuters reports

SYNDICATE

Extra Space Storage (EXR) files automatic mixed securities shelf
Hill International (HIL) files to sell 20M shares of common stock
Mercury Systems (mrcy) files $500M mixed securities shelf
New York Mortgage (NYMT) files automatic mixed securities shelf
Pathfinder Bancorp (PBHC) to commence stock offering
Uranium Energy (UEC) files to sell 199,755 shares for holders

Nearly a decade after Countrywide was sold to Bank of America in what has become the worst M&A deal of all time, bar none, having resulted in tens of billions of legal charges for Bank of America shareholders, the most recent of which was revealed also minutes ago when Bank of America was said to reach a record $17 billion settlement with the government over the sale of mortgage-backed securities, moments ago Bloomberg announced that none other than Agent Orange himself, Angelo Mozilo, is about to be sued. Again, only this time the lawsuit may actually not be tossed or result in yet another DOJ trademark wristslap.

• U.S. SAID READYING LAWSUIT AGAINST MOZILO IN COMING MONTHS
• U.S. SAID PREPARING TO FILE MOZILO LAWSUIT IN LOS ANGELES

More from Bloomberg:

Government attorneys plan to sue Mozilo, Countrywide’s former chairman and chief executive officer, and other individuals using the Financial Institutions Reform, Recovery and Enforcement Act, said one person with knowledge of probe. The law, approved by Congress in 1989 in response to savings- and-loan scandals, gives prosecutors 10 years to bring cases and has less stringent liability requirements than criminal charges.

 

While U.S. prosecutors have notified lawyers that their clients are targets of civil cases, any suit against Mozilo and other individuals may be more than a month away, one of the people said.

 

The Justice Department has been focused on wrapping up a FIRREA settlement with Bank of America Corp. for about $17 billion over mortgage bonds inherited from its 2008 acquisition of Countrywide and 2009 purchase of Merrill Lynch & Co. The accord, which may be announced as soon as tomorrow,  will penalize the Charlotte, North Carolina-based bank for how securities were marketed to investors, people familiar with the matter have said.

 

Mozilo said he has “no regrets” about how he ran Countrywide, according to a June 2011 deposition he gave in a lawsuit between the mortgage lender and bond insurer MBIA Inc.     

But why wait so long? Well, before you go high-fiving Eric Holder who is about to arrive in Ferguson, it turns out that the government seemingly waited so long just so it would avoid filing a criminal case against the Moz. As it stands he will merely be slapped with a few civil charges, and promptly settle for a few basis points of what BofA paid him for Countrywide. Bloomberg explains:

More than 12 months after a deadline passed to file criminal charges, U.S. attorneys in Los Angeles are preparing a civil lawsuit against Mozilo and as many as 10 other former Countrywide employees, according to two people with knowledge of the matter.

The government is making a last ditch-effort to hold him accountable for the excesses of the past decade’s subprime-mortgage boom, using a 25-year-old law that has helped the Justice Department win billions of dollars from Wall Street banks, said the people, who weren’t authorized to discuss the case publicly.

 

...

 

U.S. prosecutors dropped a criminal probe of Mozilo in early 2011, a person with knowledge of the matter said at the time. Since then, President Barack Obama’s administration has faced a wave of criticism from public-interest groups, the media and lawmakers who say the government hasn’t held enough individuals accountable for causing the financial crisis.

 

The Citizens for Responsibility and Ethics in Washington, a watchdog group, sued the Justice Department in June to try to obtain its records detailing investigations of Mozilo and Countrywide. The group faulted the government for failing to prosecute either Mozilo or the company “despite substantial evidence of wrongdoing.”

 

The SEC’s lawsuit, filed 16 months earlier, accused Mozilo of reassuring Countrywide investors about the quality of the company’s loans, while knowing that its underwriting standards had deteriorated.

 

Until now, the harshest penalty imposed on Mozilo, 75, has been a $67.5 million accord with the U.S. Securities and Exchange Commission from 2010 to resolve allegations that he misled Countrywide investors. Mozilo agreed to settle the SEC case in October 2010 by paying a $22.5 million fine and disgorging $45 million of gains from stock sales at what the regulator said were inflated prices. Bank of America covered a portion of his penalties.

 

He earned $535 million from 1999 to 2008, according to compensation-research firm Equilar  Inc. The size of the sanction in the SEC case, in which Mozilo didn’t admit or deny wrongdoing, compared with his pay has fueled public anger that financial executives walked away from the housing bust enriched and mostly unscathed.

Surely the best justice M&A proceeds can buy...

• That will teach the UAE who's boss: U.S. Won’t Consult Syria on Militant Strikes: White House (BBG)
• Putin Set to Meet Poroshenko as Ukraine Tensions Escalate (BBG)... but the de-escalation algo?
• Tim Hortons’ Canadian Fans Squeamish of American Hookup (BBG)
• Israeli air strikes target more Gaza high-rises (Reuters)
• How Steve Ballmer Became a Rookie Basketball Mogul (WSJ)
• Buffett to Help Finance Burger King Tax-Saving Deal (BBG)
• U.S. Factories Keep Losing Ground to Global Rivals (WSJ)
• Boehner, Camp Profit From Corporate Bid to Avoid U.S. Tax (BBG)
• Experimental U.S. hypersonic weapon destroyed seconds after launch (Reuters)
• The Neo-Neocons (WSJ)
• China Said to Consider $16 Billion EV-Charging Fund (BBG)
• California wine country quake losses seen in the billions (Reuters)
• Automotive Customer Satisfaction Dips for Second Straight Year (WSJ)
• Soros-Backed Insurer Tops Paulson Bets as U.S. Rules Loom (BBG)
• Ackman Gains 30% With Burger King, Herbalife Wagers (BBG)

Overnight Media Digest

WSJ

* Berkshire Hathaway Inc chairman and CEO Warren Buffett is helping finance Burger King Worldwide Inc's takeover of Canadian coffee-and-doughnut chain Tim Hortons Inc , according to people familiar with the matter, in a surprise twist that thrusts the billionaire into a debate over U.S. taxes. (http://on.wsj.com/1vIpQae)

* The Pentagon is preparing to send surveillance aircraft, including drones, into Syrian airspace to gather intelligence on Islamist targets, laying the groundwork for a possible expansion of the limited U.S. military air campaign beyond Iraq.(http://on.wsj.com/VLdxNW)

* America's shale boom has raised hopes of a revival in U.S. manufacturing, in part fueled by cheaper energy. But U.S. factories still are losing ground to rivals in Asia and Europe. (http://on.wsj.com/1zvGfzk)

* Amazon.com Inc said on Monday that it has agreed to buy live-streaming gaming network Twitch Interactive Inc for about $970 million in cash.(http://on.wsj.com/1lsYepk)

* A federal judge ruled against a new law in Hawaii curbing genetically modified crops, handing a victory to seed and chemical companies in a battle over modern agricultural techniques. (http://on.wsj.com/YVUcvp)

* Amid the strongest market for commercial trucks in eight years, U.S. sales of natural-gas powered haulers are just inching ahead, slowed by premium prices, limited infrastructure and more efficient diesels. (http://on.wsj.com/1wuwYLv)

* Some of the largest financial institutions in the US say Lehman Brothers Holdings Inc needs to set aside $12.14 billion to settle claims over certain soured mortgage loans, more than double what the failed investment bank has currently set aside for the dispute. (http://on.wsj.com/1mKRnCB)

* A group of hedge funds that hold 1.3 billion euros ($1.72 billion) of Argentine government bonds has filed a suit against Bank of New York Mellon seeking to gain access to interest payments they are owed. (http://on.wsj.com/1tDN5SG)

FT

Amidst an escalating standoff with Russia, Petro Poroshenko, Ukraine's pro-western president, called for snap parliamentary elections on Monday.

French President Francois Hollande on Monday evicted his Socialist government of leftwingers opposed to EU austerity.

The UK head of accounting firm Deloitte has warned that political uncertainty surrounding the general election in the United Kingdom next year is at the top of the corporate agenda.

Shares of fast-food chains Burger King and Tim Hortons rose on Monday after the companies revealed they were working on a potential merger that would result in tax savings for both companies.

Lufthansa has asked the German pilots' union VC to return to talks after the breakdown of pay discussions sparked fears of another costly strike.

Cyber security firm is in talks with banks and major financial services companies to create an alternative to Bloomberg instant messaging.

NYT

* Amazon.com Inc said it would buy Twitch, the most popular website for watching people play games for $1 billion. To win in its bid for Twitch, Amazon had to outmaneuver a who's who of the tech world, including Google Inc, strongly suggesting that these companies think the era of video-game viewing is just starting. (http://nyti.ms/1t7O53I)

* The long fight over Hewlett-Packard Co's $11.1 billion purchase of Autonomy got a new wrinkle on Monday, which might spell more legal pressure on Autonomy executives. On Monday, Judge Charles Breyer of United States District Court in San Francisco said that HP and the lawyers suing the company must file a revised proposed settlement agreement. (http://nyti.ms/1p6dLG2)

* A group of hedge funds, including George Soros's Quantum Partners and Kyle Bass's Hayman Capital, is seeking a 226 million euro ($298.4) interest payment on Argentine bonds from Bank of New York Mellon that was blocked by a United States judge last month. (http://nyti.ms/1APjBEE)

* Ann Inc, the parent company of the Ann Taylor stores, is being pressed to explore options, including a sale by the activist investor Engine Capital and the hedge fund Red Alder. In a letter made public on Monday, Engine Capital and Red Alder said they believed that the company could be worth $50 to $55 a share to an acquirer, or a 33 to 46.5 percent premium to its stock price as of Friday.(http://nyti.ms/1BX8kmZ)

* A cashless society is still a long way off, but automated machines that turn traditional money into virtual currency are cropping up across the globe. The trend has come to New York - Flat 128, a retailer that sells British jewelry and accessories in the West Village, is home to the first such machine in Manhattan and is becoming a destination for Bitcoin enthusiasts. Yet this new Bitcoin ATM is only a means for users to deposit cash and convert it to Bitcoins for their accounts; it does not offer cash withdrawals. (http://nyti.ms/1t81YP6)

* DraftKings, a fantasy sports site, is expected to announce that it has raised $41 million in a new round of financing. The investment was led by the Raine Group, a merchant bank that specializes in media and technology deals, and included three existing investors Redpoint Ventures, GGV Capital and Atlas Venture. (http://nyti.ms/1pb2ydm)

* Governor Jerry Brown of California on Monday signed into law a measure that requires smartphones sold in California to include smarter antitheft technology, a feature that lawmakers hope will help reduce phone theft. The bill, introduced by State Senator Mark Leno and sponsored by George Gascon, San Francisco's district attorney, requires a so-called "kill switch", which would render a smartphone useless after it was stolen, to be included on all smartphones sold in California starting in July 2015. (nyti.ms/1t7Z0KK)

* Thousands of hours of television programming are becoming available to rerun on digital networks and cable channels after new residual agreements between studios and Hollywood's three largest guilds. The shows now freed from "residual gridlock" include old broadcast series like "Charlie's Angels" and "The Flying Nun" and newer made-for-cable programs like "Breaking Bad" and "Sons of Anarchy," according to John Weiser, president of United States distribution for Sony Pictures Television. (http://nyti.ms/1APmEwr)

Canada

THE GLOBE AND MAIL

** Billionaire investor Warren Buffett will be helping to finance Burger King Worldwide Inc's planned merger with Tim Hortons Inc, the Wall Street Journal reported. Buffett's agreement with Burger King would likely take the form of preferred shares and be valued at around $10 billion, accounting for possibly up to 25 percent of the deal, the Journal said, citing sources familiar with the matter. (http://bit.ly/1qe36ND)

** The need to boost employment was at the forefront of New Brunswick's election campaign on Monday as the Liberals promised to improve roads and bridges while the governing Tories committed to a strategy for the shipping industry to create jobs. Liberal leader Brian Gallant announced in Moncton that he would spend C$900 million ($820.3 million) over six years on infrastructure, a plan he said would sustain about 1,700 jobs annually. (http://bit.ly/1ltn3l1)

** Canada's premiers are expected to renew their call for a public inquiry into murdered and missing aboriginal women when they gather this week in Charlottetown as the Council of the Federation. But with Prime Minister Stephen Harper continuing to reject the idea, national aboriginal leaders meeting with premiers this week will push for an alternative that would see key federal ministers sit down with aboriginal leaders to discuss the issue and potential courses of action. (http://bit.ly/1p5tnd6)

NATIONAL POST

** Corporate America is making a mad rush to the exits in a bid to lower its tax bill. But experts say the odds of political intervention in the stampede have increased as a result of U.S. Burger King Worldwide Inc's plans to become Canadian. It's an issue that's gotten enormous attention in the United States. "They're declaring they're based someplace else even though most of their operations are here," U.S. President Barack Obama said of the trend in July. (http://bit.ly/1laYdG3)

** Data centers are booming in Canada as demand grows from companies wanting to store information within borders and amid growing concern about data privacy, prompting the likes of industry giants Salesforce.com Inc and SAP SE to expand their footprint within the country. (http://bit.ly/1qIRuje)

** The British embassy in Washington, D.C., was forced to apologize on Sunday for a tweet playfully commemorating the 200th anniversary of the burning of the White House, when troops from present-day Canada ransacked the presidential palace. The embassy apologized for the joke two hours later, following many outraged tweets from Americans who didn't find the episode quite as funny. (http://bit.ly/1nwLoRU)

** The delay in moving Department of National Defence employees into the former Nortel campus is costing taxpayers millions of dollars, according to documents leaked to the Ottawa Citizen. The government spent C$208 million to buy the Nortel complex. At a December 2013 briefing for journalists, defence officials said it will cost another C$506 million to refit the buildings and C$41 million in "transition costs," which are the costs of existing leases at other sites throughout Ottawa and Gatineau. But a January 2014 internal document noted that additional costs were being incurred because of the delay in moving employees to the campus. (http://bit.ly/1t8yLng)

China

CHINA SECURITIES JOURNAL

- Inner Mongolia Baotou Steel Rare-Earth Group Hi-Tech Co Ltd plans to invest nearly 8 billion yuan ($1.30 billion) to tackle environmental problems at its smelting plants and Baotou Huamei Products Co Ltd, the company said in an announcement late on Monday.

SHANGHAI SECURITIES NEWS

- China's insurance funds have shown growing interest in the primary market's non-public offering on the back of increased funding activities. Their interests also reflect a structural change in the insurance industry that could bring a new group of institutional investors in the stock market, the paper said in a commentary.

- Jiangsu Hengli Highpressure Oil Cylinder Co Ltd plans to acquire a 51 percent stake in a European counterpart in the amount of 2.5 million euros ($3.3 million), according to a company announcement.

SECURITIES TIMES

- Some 42 companies planning initial public offerings (IPO) have been blacklisted for six months due to breach of conduct, according to a report by the Securities Association of China.

CHINA DAILY

- Alipay, China's largest online payment provider, announced on Monday the official launch of Zhaocai Bao, an Internet finance platform that aims to reshape financing for small businesses to the tune of 1 trillion yuan ($162 billion) within 3 years.

- Chinese nuclear companies are preparing to export nuclear power reactors as they increase involvement in foreign projects and establish a complete industry chain, company officials and engineers said. Exporting plants will help domestic manufacturers improve their technology levels and recover the huge costs of research and development.

SHANGHAI DAILY

- Sales of new homes in Shanghai in August are likely to be very sluggish after seven-day transactions remained below 150,000 sq m for the third straight week. Purchases of new homes, excluding government-funded affordable housing, fell 0.98 percent to 129,700 sq m last week, Uwin Real Estate Information Services Co said in a report.

Britain

The Times

BIG SIX WAIT FOR INVESTIGATION TO ROLL THE DICE

Some time in May or June next year - in all likelihood after the general election on May 7 - the Competition and Markets Authority will publish the initial findings of its investigation into the energy market. It is an indication of the task facing the authority that analysts are not remotely confident about predicting the outcome.

The Guardian

POLL: 71 PCT FIND ALEX SALMOND VICTORIOUS IN SECOND SCOTTISH INDEPENDENCE DEBATE

Alex Salmond emerged as the clear winner of the second Scottish independence debate, besting Alistair Darling by a 71 percent to 29 percent margin, according to an instant Guardian/ICM poll of Scots who had watched the debate.

CO-OP MEMBERS WARNED MANAGEMENT SHAKEUP MAY NOT GO FAR ENOUGH

As members of the Co-Operative Group prepare to vote on sweeping changes to the way the troubled chain of supermarkets, chemists and funeral homes is managed, they have already been warned that the proposed shakeup may not go far enough.

The Telegraph

BRITAIN DENIED KEY EU ROLE FOR NOT PICKING A WOMAN Jean-Claude Juncker expresses frustration that "despite my repeated requests," most governments, including Britain, have put forward men for the most important positions in Europe.

ALEX SALMOND DECLARED VICTOR OF SECOND INDEPENDENCE TV DEBATE AFTER HEATED CLASH

Alex Salmond has been declared the victor of the second independence TV debate with Alistair Darling after the showdown descended into an angry shouting match.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Durable goods orders for July at 8:30--consensus up 5.1%
S&P Case-Shiller 20-city composite home price index for June at 9:00--consensus up 8.4% from prior year
Consumer confidence for August at 10:00--consensus 89.5

ANALYST RESEARCH

Upgrades

Macerich (MAC) upgraded to Outperform from Market Perform at BMO Capital
SandRidge Permian (PER) upgraded to Outperform from Market Perform at Raymond James

Downgrades

Arcos Dorados (ARCO) downgraded to Neutral from Buy at BofA/Merrill
Bancolombia (CIB) downgraded to Underweight from Neutral at HSBC
Cemig (CIG) downgraded to Underweight from Neutral at JPMorgan
InterMune (ITMN) downgraded to Hold from Buy at Jefferies
InterMune (ITMN) downgraded to Market Perform from Outperform at JMP Securities
InterMune (ITMN) downgraded to Neutral from Overweight at JPMorgan
LIN Media (LIN) downgraded to Equal-Weight from Overweight at Evercore
Qihoo 360 (QIHU) downgraded to Neutral from Outperform at Credit Suisse
Simon Property (SPG) downgraded to Market Perform from Outperform at BMO Capital
Tim Hortons (THI) downgraded to Neutral from Buy at Longbow

Initiations

Cray (CRAY) initiated with a Buy at Stifel
Enphase Energy (ENPH) initiated with a Buy at Needham
FCB Financial (FCB) initiated with a Buy at UBS
FCB Financial (FCB) initiated with an Overweight at JPMorgan
Goldman Sachs (GS) initiated with a Buy at MKM Partners
HealthEquity (HQY) initiated with a Neutral at RW Baird
Jarden (JAH) initiated with a Buy at Deutsche Bank
Loxo Oncology (LOXO) initiated with an Outperform at JMP Securities
Macrocure (MCUR) initiated with a Buy at Nomura
Marinus Pharmaceuticals (MRNS) initiated with an Outperform at JMP Securities
Mobileye (MBLY) initiated with a Buy at Deutsche Bank
Mobileye (MBLY) initiated with a Neutral at Goldman
Mobileye (MBLY) initiated with a Neutral at RW Baird
Mobileye (MBLY) initiated with an Outperform at Wells Fargo
Mobileye (MBLY) initiated with an Overweight at Barclays
RAIT Financial (RAS) initiated with an Outperform at JMP Securities
SunEdison (SUNE) initiated with an Outperform at FBR Capital
Transocean Partners (RIGP) initiated with an Equal Weight at Barclays
VTTI Energy (VTTI) initiated with an Outperform at Wells Fargo

COMPANY NEWS

Amazon (AMZN) confirmed the acquisition of Twitch Interactive for approximately $970M
DISH Network (DISH) petitioned FCC to deny Comcast (CMCSA), Time Warner Cable (TWC) merger
Comtech (CMTL) confirmed it is exploring strategic alternatives
Western Digital (WDC) said CFO Tim Leyden to retire and be succeeded by Olivier Leonetti
Premier (PINC), which reported Q4 results and provided FY15 guidance, said it will acquire Aperek for $48.5M
Kite Pharma (KITE) announced positive phase 1-2a results, demonstrating the potential to treat aggressive non-Hodgkin's lymphoma with an anti-CD19 chimeric antigen receptor, or CAR, T cell therapy

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Taomee (TAOM), Tech Data (TECD), Renren (RENN), Premier (PINC)

Companies that missed consensus earnings expectations include:
Sanderson Farms (SAFM), Regis (RGS), Prospect Capital (PSEC), iKang Healthcare (KANG), Adept Technology (ADEP), Immunomedics (IMMU)

NEWSPAPERS/WEBSITES

Berkshire (BRK.A) may provide 25% of financing for Burger King (BKW)/Tim Hortons (THI) deal, WSJ says
Time Warner (TWX) to offer buyouts to 4% of cable unit's staff, Reuters reports
Burger King (BKW) wants merger despite problems with dining combos, NY Times reports (THI)
Microsoft's (MSFT) web browser, media player targeted in China probe, Telegraph reports
Cliffs Natural (CLF) CEO supports sale of non-core assets 'at right price,' WSJ says
Fairchild (FCS) to shed 15% of workforce, WSJ reports
Madison Square Garden (MSG) has more room for gains, Barron's says

Submitted by Pater Tenebrarum of Acting-Man blog,

Update on Global High Yield Debt Issuance Volumes

Here is a small addendum to our recent articles on the corporate debt bubble (“A Dangerous Boom in Unsound Corporate Debt”) and the associated derivatives-berg, which is intended to hedge both the credit and interest rate risk this credit boom has given rise to (“A Perilous Derivatives-Berg”).

We recently combed through John Hussman's weekly commentaries, one of which contained an up-to-date chart of global high yield debt issuance per quarter from Q1 2006 to Q2 2014. Both global issuance volume and the number of deals are depicted on the chart. As you can see, we have long left all previous records in the dust.

Global high yield debt issuance in USD billion per quarter, plus the number of offerings, via John Hussman.

How Compressed Risk Premiums Unwind

This low-grade debt bubble is undoubtedly going to prove to be the Achilles heel of the current inflationary boom period – even though many market participants strenuously deny it by relying on the 12 month default forecasts published by rating agencies (which show not even the smallest cloud on the horizon – in other words, it's all good). As the next chart shows, risk premiums have become extremely compressed. Mr. Hussman had something very interesting to say on that particular topic, namely:

“As we saw in multiple early selloffs and recoveries near the 2007, 2000, and 1929 bull market peaks (the only peaks that rival the present one), the “buy the dip” mentality can introduce periodic recovery attempts even in markets that are quite precarious from a full cycle perspective. Still, it's helpful to be aware of how compressed risk premiums unwind. They rarely do so in one fell swoop, but they also rarely do so gradually and diagonally. Compressed risk premiums normalize in spikes.

 

As a market cycle completes and a bull market gives way to a bear market, you’ll notice an increasing tendency for negative day-to-day news stories to be associated with market “reactions” that seem completely out of proportion. The key to understanding these reactions, as I observed at the 2007 peak, is to recognize that abrupt market weakness is generally the result of low risk premiums being pressed higher. Low and expanding risk premiums are at the root of nearly every abrupt market loss.

 

Day-to-day news stories are merely opportunities for depressed risk premiums to shift up toward more normal levels, but the normalization itself is inevitable, and the spike in risk premiums (decline in prices) need not be proportional or “justifiable” by the news at all.

 

Remember this because when investors see the market plunging on news items that seem like “nothing,” they’re often tempted to buy into what clearly seems to be an overreaction. We saw this throughout the 2000-2002 plunge as well as the 2007-2009 plunge.”

(emphasis added)

This is an important observations regarding the connection between news releases and financial markets. The news are actually rarely the cause of market movements (which more often than not makes the attempts in the financial press to “explain” day-to-day market movements incredibly comical).

Market participants only use news as triggers when it suits them, in other words, when they seem to confirm what they were going to do anyway. The important point is not whether news emerge that are seemingly associated with market moves; the important point is the degree of overvaluation and leverage.

Effective yield of the Merrill US high yield master II index – currently at 5.5%. Similar levels of return-free risk were on offer in 2005-2007 – click to enlarge.

Comforting Myths

Hence there rarely seems to be a “reason” for why market crashes happen. Market observers are e.g. debating to this day what actually “caused” the crash of 1987. It is in the nature of the beast that once liquidity evaporates sufficiently that not all bubble activities can be sustained at once any longer, bids begin to become scarce in one market segment after another. Eventually, they can disappear altogether – and sellers suddenly find they are selling into a vacuum.

Once this happens, the usual sequence of margin calls and forced selling does the rest. Risk premiums normalize abruptly, and there doesn't need to be an obvious reason for this to happen. Mr. Hussmann inter alia cites Kenneth Galbraith's description of the crash of 1929 in this context. Galbraith correctly remarked that when the crash occurred, no-one knew that a depression was lying dead ahead. The crash itself would have been in the cards regardless of what happened later. Anything could have broken the bubble, as Galbraith put it. The crash merely adjusted a situation that had become unsustainable.

After an extended credit boom, leverage can be assumed to have seeped into every nook and cranny of the markets.  In the stock market, we see it in record high margin debt and the tiny cash reserves held by mutual funds and other investors. In fixed interest rate securities, investors are encouraged by low volatility and the seeming absence of risk to lever up, as their returns on newly issued debt begin to shrink along with falling interest rates. In so doing, the risks are usually judged by looking at market history. In every bubble, a new myth emerges that seemingly justifies such investment decisions.

In the housing bubble, the myth of choice was that house prices could never fall on a nationwide basis. After all, history showed it had never happened before. It was held that eventually, problems may emerge in some regions or some sub-sectors of the credit markets, but they would remain localized and “well contained” (the favorite phrase employed by assorted officials when the bubble began to fray at the edges). In the current bubble the myth of choice is that “past crises have shown that defaults on high yield corporate debt never exceed certain manageable levels”.

Why is this a myth? After all, it is a historically correct view. It is a myth for one reason only: in all of history, there has never been a bigger bubble in junk debt than now (just as the real estate and mortgage credit bubble were unique in their extent). Therefore, economic history actually has little to say about the current situation, except for the general statement that compressed risk premiums have a tendency to one day readjust out of the blue and quite abruptly. Economic history can definitely not be used to assert that the risks are small. They are in fact huge and continue to grow.

Conclusion

Compressed risk premiums can never be sustained “forever”. They are so to speak sowing the seeds of their own demise. Most market participants believe they will be able to get out in time, but that is never the case – in fact, it is literally impossible for the majority to do so, because someone must buy what others sell (by definition, this means someone will be caught holding the bag when the tide goes out). In reality, it is ever only a tiny minority that manages to sell near the market peak, not least because investors have assimilated the lesson that “every dip is a buying opportunity”. This will be true until it one day isn't anymore (the search for reasons will then predictably yield the well-known phrase “no-one could have seen it coming”).

• Islamic State executes soldiers, takes hostages at Syria base (Reuters)
• Buffett Burger King Funds Flip Obama’s Inversion Calculus (BBG)
• Equities Reach Record $66 Trillion as S&P 500 Hits 2,000 (BBG)
• Central Banks Playing Own Version of Plaza-opoly With FX (BBG)
• Russia court closes McDonald's branch for 90 days (Reuters)
• Finland Says NATO an Option After Russia ‘Violates’ Border Laws (BBG)
• Netanyahu Hit With Domestic Criticism Over Gaza Truce (BBG)
• Biggest Danish Fund Readies for Rate Shock as Exit Narrows (BBG)
• Nonprofit Hospitals' Profits Fall (WSJ)
• Snapchat Fetches $10 Billion Valuation (WSJ), a year after it was valued at $800 million
• Apple Said to Prepare New 12.9-Inch IPad for Early 2015 (BBG)
• Demonstrations resume in Missouri over shooting death of black teen (Reuters)
• China Is Awash in Grain Crops (WSJ)

Overnight Media Digest

WSJ

* Israel and Hamas agreed to their first open-ended cease-fire after seven weeks of military confrontation and will resume truce talks in Cairo in the coming days. (http://on.wsj.com/1ldqdZE)

* Burger King Worldwide Inc defended its acquisition of Tim Hortons Inc as the hamburger chain came under criticism for its effort, backed by billionaire investor Warren Buffett, to move the quintessential American brand to Canada. (http://on.wsj.com/1ASHDyp)

* Kleiner Perkins Caufield & Byers agreed to invest in Snapchat at a valuation of close to $10 billion, making it one of the world's most valuable private tech start-ups.(http://on.wsj.com/1qKk2J9)

Big Tobacco is finally making its big push into electronic cigarettes. Altria Group Inc and Reynolds American Inc together have captured about a quarter of convenience-store sales just weeks into national rollouts of the battery-powered devices. In a surprising development, though, e-cigarette sales are falling at these traditional retail outlets, reversing three years of rapid-fire growth. (http://on.wsj.com/XQZ04P)

* American Airlines Group Inc has withdrawn its flights from consumer websites powered by Orbitz Worldwide Inc, following a similar dispute between the airline and the travel website about three years ago. (http://on.wsj.com/1ASIgbc)

* The U.S. Securities and Exchange Commission is expected to complete rules Wednesday that would require banks and other firms to provide investors with more details about loans pooled into bonds known as asset-backed securities. (http://on.wsj.com/1pfnn7m)

* Islamic State insurgents have planted explosives to stall a Kurdish push to retake the town of Jalawla, an unfolding strategy that foes describe as built on patience, the element of surprise and a willingness to take losses. (http://on.wsj.com/1wzYEib)

* A meeting between the Russian and Ukrainian presidents failed to produce a breakthrough for ending the conflict over eastern Ukraine, as Kiev released videos of captured Russian soldiers and rebels pushed toward a government-held city. (http://on.wsj.com/1zBS7ji)

* Singapore's Oversea-Chinese Banking Corp and its insurance unit have entered exclusive talks to sell their stakes in property and engineering company United Engineers Ltd to Thai billionaire Charoen Sirivadhanabhakdi. (http://on.wsj.com/1qsXYGl)

FT

The United States is preparing military options, including surveillance flights, to pressure Islamic State in Syria, U.S. officials said on Monday.

Europe's leaders are set to select Federica Mogherini, Italy's foreign minister, as EU foreign policy chief at a summit on Saturday, despite worries among some EU countries that she is too inexperienced and will not be tough enough on Russia.

Warren Buffett defended his role in Burger King's $11.4 billion acquisition of coffee and doughnuts chain Tim Hortons, that will see the U.S. fast food chain's headquarters move to Canada as part of the tax inversion deal.

The United Kingdom's Financial Conduct Authority could fine Royal Bank of Scotland about 15 million pounds ($24.82 million) over its mortgage record-keeping and advice to borrowers, according to two people familiar with the matter.

WPP, the world's largest advertising company, said the strong British pound "ravaged" its revenues, wiping more than 400 million pounds $661.72 million) off its net sales in the first half of the year.

NYT

* As Detroit prepares to defend its plan next week to exit bankruptcy, city leaders have received an unusual offer: Why not mortgage all the Van Goghs, Picassos and other works in the Detroit Institute of Arts? A company called Art Capital, which makes loans backed by artwork, has told the city it is willing to lend it up to $3 billion, roughly 10 times the exit financing Detroit is now contemplating, using the museum's art as collateral. But the city's response is silence. (http://nyti.ms/1tBtQtM)

* Allergan Inc, the Botox maker fending off a hostile takeover attempt by Valeant Pharmaceuticals International Inc and Pershing Square Capital Management, has set a date for a special meeting at which shareholders will have the opportunity to vote out a majority of the board. In a filing with the Delaware Chancery Court, Allergan said the meeting would take place on Dec. 18. (http://nyti.ms/1ryIcfQ)

* Google Inc announced Tuesday that it bought Boston-based Zync Inc, the maker of Zync Render, a "cloud-based rendering software." Google wouldn't say how much it paid for Zync. The company will integrate Zync's data and technology into the Google Cloud Platform, and move off Amazon.com Inc Web Services. (http://nyti.ms/1syGo2c)

* A cross-border fast-food deal has united Warren Buffett with one of his favorite investors. Buffett's conglomerate, Berkshire Hathaway, is helping finance Burger King Worldwide Inc's $11.4 billion takeover of the Canadian restaurant chain Tim Hortons Inc by buying $3 billion of preferred shares in the new company. (http://nyti.ms/XQVDee)

* Time Warner Inc's Turner Broadcasting System division said on Tuesday that it was offering buyouts to about 600 employees, the first step in an ambitious effort to overhaul a portfolio of cable networks that have struggled with declining ratings at a time of intense competition for viewers. Layoffs and additional cost-cutting measures will follow, according to an internal memo announcing the buyouts. (http://nyti.ms/YWQEsE)

* Volvo AB on Tuesday introduced its first vehicle designed and built under Chinese ownership. The vehicle, a seven-seat sport utility vehicle known as the XC90 that will go on sale in April, is probably a make-or-break model for Volvo. (http://nyti.ms/1qKeyxX)

* Michael Lucarelli, the director of market intelligence at Lippert/Heilshorn and Associates, was arrested and charged with 13 counts of insider trading for buying and selling stocks based on information in news releases his company had prepared for its clients, the Federal Bureau of Investigation and Preet Bharara, the United States attorney in Manhattan, said in a statement. (http://nyti.ms/1zBUTVN)

* The Swiss private bank Pictet Group reported its financial results publicly for the first time in its 209-year history on Tuesday, showing a profit and highlighting continuing changes in Switzerland's traditionally secretive banking culture. (http://nyti.ms/1tEZy8F)

* Governments should ban the use of electronic cigarettes in public places and outlaw tactics to lure young users, the World Health Organization said in a report released on Tuesday that calls for some of the toughest measures yet proposed for the increasingly popular devices. It also expressed "grave concern" about the growing role of the powerful tobacco industry in the e-cigarette market. (http://nyti.ms/1qsW1tG)

Canada

THE GLOBE AND MAIL

** Barrick Gold Corp is eliminating its entire corporate development team and more cuts are in the works as the world's top gold miner looks to trim costs, three sources familiar with the situation said on Tuesday. (http://bit.ly/1zDcYml)

** Canada's public health agency is preparing to bring home a trio of scientists who were helping to combat Ebola in Sierra Leone after three people in their hotel complex tested positive for the viral hemorrhagic fever. A Health Canada spokesman confirmed late Tuesday night that the Public Health Agency of Canada is finalizing plans to pull its mobile laboratory team out of the West African country. (http://bit.ly/1tCil5r)

NATIONAL POST

** Cominar Real Estate Investment Trust has signed a deal to buy a portfolio of 15 properties including shopping centres, office buildings and an industrial park in Quebec and Ontario from Ivanhoe Cambridge Inc for C$1.53 billion ($1.40 billion). (http://bit.ly/1qgvNtt)

** Hewlett-Packard Co is recalling more than 6 million personal-computer power cords in the United States and Canada, citing reports of overheating and melting units. The cords, distributed with Hewlett-Packard and Compaq notebooks and related products, were sold from September 2010 to June 2012, the company and U.S. Consumer Product Safety Commission said in a statement on Tuesday. (http://bit.ly/1p84Gg4)

** The Canadian Human Rights Tribunal has ordered Human Resources and Skills Development Canada to reimburse former employee Leslie Hicks nearly C$17,000 ($15,606) in expenses after ruling last year the department had engaged in "reckless discrimination" against him. (http://bit.ly/1tCcRHF)

** Drivers in Ontario could soon face much stiffer penalties for texting behind the wheel, as the governing Liberals are set to reintroduce a bill that would boost the maximum fine to C$1,000 ($918). (http://bit.ly/1zD3RSL)

Hong Kong

- The president of China Resources Power (CRP) and a Shanxi tycoon, believed to be the biggest beneficiary of a controversial coal investment, have been detained by authorities. CRP said its executive director Wang Yujun was under investigation in Jiangsu province, while sources revealed that Zhang Xinming, once the richest man in Shanxi, had been detained earlier this month. (bit.ly/1wzmdaR)

- Fashion retailer Fujian Nuoqi should have disclosed more information on its two failures to list on the mainland before floating its shares in Hong Kong, and CCB International, the sole sponsor of the share sale, may possibly be disciplined, analysts said. Nuoqi, which listed in Hong Kong in January, reported to police in July that its chairman was missing. (bit.ly/1tSzh5V)

- Homebuyers are increasingly seeking to finance their purchases with loans based on the lower interest rates in the Hong Kong interbank offered rate market. The percentage of mortgage applicants opting for loans priced with reference to Hibor rose from 42 percent in January to 77 percent in June, Hong Kong Monetary Authority data shows. (bit.ly/VMCAAa)

THE STANDARD

- Hopewell Holdings declared a special dividend distribution of one share of Hopewell Highway Infrastructure for every 20 shares of the developer, hoping to boost HHI's market liquidity and shareholder base. (bit.ly/YWM5i7)

- The Urban Renewal Authority's Kwun Tong redevelopment project received six tenders, including Henderson Land , Sun Hung Kai Properties, Wheelock and Great Eagle. It is believed to involve a total investment of HK$18 billion ($2.3 billion). (bit.ly/1luUVhl)

HONG KONG ECONOMIC JOURNAL

- Internet game developer Forgame Holdings Ltd said its net loss narrowed to 2.14 million yuan for the first half of 2014, from a 233 million yuan loss in the year-ago period.

HONG KONG ECONOMIC TIMES

- China Securities Regulatory Commission has approved Shenzhen Stock Exchange's plan to conduct a feasibility study in relation to a trading connection with the Hong Kong stock exchange, according to a Shenzhen municipality official.

MING PAO DAILY NEWS

- Department store operator Golden Eagle Retail Group Ltd , which is under pressure due to keen competition from e-commerce sites, is not in a hurry to develop its own e-commerce business as the company has still not seen a proven profit-making business model so far, according to chairman Roger Wang.

Britain

The Times

FRAUD OFFICE ATTACKS FLAWED CRIME REPORTS

The Serious Fraud Office has criticised the recruitment of independent experts to investigate criminal behaviour in companies, warning that the practice risks destroying the evidence needed to put rogue business people and bankers behind bars.

HOUSE PRICES EXPECTED TO RISE BY MORE THAN 25 PCT IN FIVE YEARS

House prices in Britain will be more than 25 percent higher in five years, with London finally being overtaken by other parts of the country.

The Guardian

CAMERON FACES DOUBLE 2015 TROUBLE

UKIP leader Nigel Farage and London Mayor Boris Johnson take steps toward Westminster, causing political headaches for Tory leaders.

SCOTTISH YES VOTE AND BRITISH EU EXIT COULD HIT UK ECONOMY, SAYS SORRELL

WPP boss Sir Martin Sorrell has warned that the prospect of Scotland voting for independence and Britain leaving the European Union could weaken the UK economy, adding to worries over heightened geopolitical tensions in Ukraine and the Middle East.

The Telegraph

GORDON BROWN AND ALISTAIR DARLING PUT ASIDE DIFFERENCES IN FIGHT FOR UK The former Prime Minister and his former chancellor are to share a platform for the first time in the independence referendum debate following Alex Salmond's damaging TV debate victory.

SCOTTISH INDEPENDENCE VOTE COULD PROMPT PENSIONS CRISIS If Scotland votes "yes" this September, EU pension rules could threaten the cash flow of the UK's largest companies, warns JPMorgan.

Sky News

RBS HIT BY 15 MLN STG FCA MORTGAGE ADVICE FINE

Royal Bank of Scotland will on Wednesday add to the list of misconduct for which it has been fined since it was bailed out by British taxpayers when it pays millions of pounds for giving poor advice to mortgage customers.

CALL FOR E-CIGARETTES TO BE BANNED INDOORS The World Health Organisation wants tougher regulation, including a ban on selling to minors and on vending machines in public.

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports today include:
MBA purchase applications for week of Aug. 22--up 2.8%

ANALYST RESEARCH

Upgrades

Aruba Networks (ARUN) upgraded to Buy from Neutral at UBS
Hilltop Holdings (HTH) upgraded to Outperform from Market Perform at Keefe Bruyette
Rent-A-Center (RCII) upgraded to Buy from Hold at Canaccord
Tim Hortons (THI) upgraded to Neutral from Underperform at Credit Suisse
Waste Management (WM) upgraded to Buy from Hold at Stifel

Downgrades

Bank of Nova Scotia (BNS) downgraded to Neutral from Outperform at Credit Suisse
E-House (EJ) downgraded to Neutral from Buy at Goldman
Facebook (FB) downgraded to Neutral from Buy at Janney Capital
Laredo Petroleum (LPI) downgraded to Hold from Buy at Canaccord
Leju (LEJU) downgraded to Neutral from Buy at Goldman
Pioneer Natural (PXD) downgraded to Hold from Buy at Canaccord
Sturm, Ruger (RGR) downgraded to Fair Value from Buy at CRT Capital
Susser Petroleum downgraded to Market Perform from Outperform at Wells Fargo
Tim Hortons (THI) downgraded to Sector Performer from Outperformer at CIBC

Initiations

ASML (ASML) initiated with a Hold at Stifel
Akamai (AKAM)initiated with an Outperform at RW Baird
Alcobra (ADHD) initiated with a Market Perform at FBR Capital
Axcelis (ACLS) initiated with a Buy at Stifel
Bank of the Ozarks (OZRK) initiated with a Buy at Drexel Hamilton
Bristol-Myers (BMY) initiated with a Hold at Deutsche Bank
Concur (CNQR) initiated with a Neutral at DA Davidson
Cornerstone OnDemand (CSOD) initiated with a Neutral at DA Davidson
CyrusOne (CONE) initiated with a Neutral at Citigroup
Eli Lilly (LLY) initiated with a Buy at Deutsche Bank
FCB Financial (FCB) initiated with a Neutral at Guggenheim
First Financial (FFIN) initiated with a Hold at Drexel Hamilton
Garmin (GRMN) initiated with a Neutral at RW Baird
Marketo (MKTO) initiated with a Buy at DA Davidson
Merck (MRK) initiated with a Hold at Deutsche Bank
NetSuite (N) initiated with a Buy at DA Davidson
Oracle (ORCL) initiated with a Neutral at DA Davidson
Oxford Industries (OXM) initiated with a Buy at Wunderlich
Pfizer (PFE) initiated with a Buy at Deutsche Bank
ServiceNow (NOW) initiated with a Buy at DA Davidson
Southside Bancshares (SBSI) initiated with a Hold at Drexel Hamilton
Workday (WDAY) initiated with a Neutral at DA Davidson

COMPANY NEWS

Allergan (AGN) requests block to Ackman, Valeant (VRX) votes, announces Special Meeting date of December 18
Royal Bank of Scotland (RBS), NatWest fined GBP14.47M by FCA
Mario Gabelli told CNBC that Chemtura (CHMT) has limited downside, can double in next five years; Gabelli also said he thinks Diebold (DBD) is "in the beginning of a major turnaround"
Aruba Networks (ARUN) announced a 3.7% workforce reduction
Cooper Tire (CTB) said Chengshan JV valued at around $440M
CFTC ordered Merrill Lynch (BAC) to pay $1.2M fine for supervision failures
Lakes Entertainment (LACO) engaged financial advisor to explore strategic alternatives
Chiquita Brands (CQB), Fyffes now see $60M of annualized pre-tax cost savings
EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Donaldson (DCI), Seadrill (SDRL), Globe Specialty Metals (GSM), HEICO (HEI), Dycom (DY), TiVo (TIVO), TubeMogul (tube), Smith & Wesson (SWHC), Nimble Storage (NMBL), Aruba Networks (ARUN)

Companies that missed consensus earnings expectations include:

SQM (SQM), Solera (SLH)

Companies that matched consensus earnings expectations include:

Bob Evans (BOBE), Analog Devices (ADI)

NEWSPAPERS/WEBSITES

Apple (AAPL) readying larger iPad for 2015 launch, Bloomberg reports
Shell-led (RDS.A) group close to selling Nigeria oilfields for $5B, FT reports (TOT, E)
AT&T's (T) Ralph de la Vega to oversee enterprise and mobile, Re/code reports
Apple (AAPL) may introduce a thinner MacBook as early as this year, Digitimes says
Intel (INTC) working on luxury smart bracelet with curved glass display, Business Insider reports
Amazon (AMZN) steps point to digital health entry, VentureBeat says
Repsol (REPYY), Talisman (TLM) talks on oil and natural gas assets stall, WSJ reports
Time Warner Cable (TWC) customers reporting outages nationwide, Business Insider reports

SYNDICATE

Air Industries (AIRI) files $12.14M mixed securities shelf
Ardmore Shipping (ASC) files $300M mixed securities shelf
BNC Bancorp (BNCN) files $150M mixed securities shelf
Carver Bancorp (CARV) requests withdrawal of registration statement
Compugen (CGEN) files $200M mixed securities shelf
Gabelli Equity Trust announces rights offering
Quest Resource Holding (QRHC) files $50M mixed securities shelf

By EconMatters

© EconMatters All Rights Reserved | Facebook | Twitter | Email Subscribe | Kindle

• Confusion as Ukraine and Russia announce progress towards peace (Reuters)... but not for stock buying algos, they know everything
• Obama Expresses Skepticism About Possible Ukraine Cease-Fire (WSJ)
• Fighters Unwind in Russia Where Beer Doesn’t Spell Death (BBG)
• Despite dangers, U.S. journalist Sotloff was determined to record Arab Spring's human toll (Reuters)
• New Beheading Video Spurs Calls for Global Response (BBG)
• Christie’s Spending on Outside Lawyers Passes $50 Million (BBG)
• IEX to Apply for Exchange Status (WSJ)
• UK says not ruling out airstrikes against Islamic State, says hostage video genuine (Reuters)
• Murdered journalist Steven Sotloff had dual US-Israeli citizenship (Guardian)
• Netflix Reaches Global Licensing Pact With Warner Bros. for 'Gotham' (WSJ)
• West Africa struggles to contain Ebola as warnings and deaths mount (Reuters)
• Money Chases Non-U.S. Real Estate at Record Rate in ETFs (BBG)
• U.S. bank regulators set to adopt liquidity, swaps margin rules (Reuters)

Overnight Media Digest

WSJ

* The extremist group Islamic State posted a video purporting to show the beheading of American journalist Steven Sotloff, bringing calls for the U.S. to more forcefully confront the militants in both Iraq and Syria. (http://on.wsj.com/1nV1kxG)

* California regulators want PG&E Corp's utility to pay $1.4 billion in fines and penalties over a fatal natural-gas pipeline explosion in San Bruno, California. The state Public Utilities Commission proposed fining Pacific Gas & Electric Co $950 million over allegations that the company violated federal and state pipeline safety rules before the 2010 pipeline explosion. (http://on.wsj.com/1ly45JF)

* Private-equity firm KKR & Co LP said Tuesday it agreed to buy a minority stake in Savant Systems LLC, a closely held Hyannis, Massachusetts, company that sells systems that let homeowners control everything from thermostats and stereos to lighting and lawn sprinklers, from their smartphones. KKR is leading an investment of about $90 million in the company and the firm will have a roughly 35 percent stake in Savant, according to a person familiar with the matter. (http://on.wsj.com/1BaH17E)

* Home Depot Inc is working with banks and law enforcement agencies to investigate a potential breach of customer credit- or debit-card data. The home-improvement retailer said on Tuesday it is looking into what it called unusual activity and said that if it confirms a breach occurred, it will immediately notify customers. (http://on.wsj.com/1nwyEem)

* A key employee leading Google Inc's efforts to beam Internet access from satellites has abruptly left the company and is now working closely with Space Exploration Technologies Corp and its founder Elon Musk, according to people familiar with the matter. (http://on.wsj.com/1tsh3LA)

* The Federal Bureau of Investigation hasn't found any evidence to suggest the hacker or hackers who successfully penetrated the computer system at JPMorgan Chase & Co scored any similar successes against other big U.S. banks, four people close to the investigation said. (http://on.wsj.com/1pGzVFa)

* IEX Group Inc, an upstart private trading venue launched less than a year ago, plans within a week to seek U.S. regulatory approval to become a full-fledged stock exchange, according to people familiar with the company's plans. (http://on.wsj.com/1lH58HC)

* An internal Credit Suisse Group AG investigation into allegations of inappropriate employee behavior has roiled the bank's European stock-trading desk, according to people familiar with the probe, in the latest example of a major bank uncovering potential problems as it sifts through employees' electronic communications. (http://on.wsj.com/1ux5LTD)

* Halliburton Co will pay $1.1 billion to Gulf Coast residents, local governments and businesses affected by the 2010 Deepwater Horizon oil spill, moving to limit its liabilities ahead of a court ruling that could have increased its costs. (http://on.wsj.com/1x6PJVT)

* Wet Seal Inc disclosed Tuesday that its chief executive left the company, effective Aug. 26, according to a filing with the Securities and Exchange Commission. (http://on.wsj.com/Z6vhW1)

FT

Luxury eyewear maker Luxottica Group SpA's founder and Executive Chairman Leonardo Del Vecchio is expected to pursue acquisitions and wants to double the groups revenue to more than 14 billion euros ($18.38 billion)in the next decade.

BP Plc asked a U.S. court on Tuesday to fire the court-appointed lawyer tasked with paying out compensation to people affected by the 2010 Gulf of Mexico oil spill.

Aston Martin has hired senior Nissan executive Andy Palmer as its new boss, as the company tries to bridge the gap with its competitors.

Danone said that Chairman and Chief Executive Franck Riboud would split his role after 18 years at the helm of the French yoghurt maker.

A Frankfurt court has issued a temporary injunction against U.S. car service Uber, saying the company could no longer offer its phone apps to connect drivers with passengers.

NYT

* The European Central Bank's negative rates strategy has not worked as planned, which is why it is under increasing pressure to try something else when it meets on Thursday. The central bank's so-called negative deposit rate has rippled through European markets, reinforced by fear that the eurozone economy is in decline and by nervousness about war, not only in Ukraine but also in the Middle East. (nyti.ms/W8Auub)

* Halliburton Co, the company contracted by BP Plc to cement the ill-fated Macondo oil well in the Gulf of Mexico, has reached a $1.1 billion settlement with thousands of businesses, individuals and local governments that suffered losses from the 2010 Deepwater Horizon oil rig explosion, the company and plaintiffs announced on Tuesday. (nyti.ms/1q9xuKF)

* Dollar General Corp is willing to pay more to win the bidding war over Family Dollar Stores Inc. And its takeover effort could go hostile if Family Dollar does not begin sale negotiations. Dollar General offered on Tuesday to raise its bid for Family Dollar to $9.1 billion after the rejection of an earlier offer that would have beaten a rival $8.5 billion deal with Dollar Tree, agreed to in late July. (nyti.ms/1pGpH7Q)

 
* Online fantasy sports site FanDuel, one of the biggest homes for amateur general managers, disclosed on Tuesday that it had raised $70 million from investors led by Shamrock Capital Advisors, NBC Sports Ventures and Kohlberg Kravis Roberts & Co . Existing investors like Comcast Ventures, Pentech Ventures and Bullpen Capital also participated. (nyti.ms/1rj6yrJ)

* Compuware Corp has agreed to sell itself to the private equity firm Thoma Bravo for about $2.5 billion, finally bowing out after years under pressure from the activist hedge fund Elliott Management. (nyti.ms/1qZv4KL)

* Norwegian Cruise Line Holdings Ltd agreed on Tuesday to buy the privately held Prestige Cruises International for $3 billion in cash and stock, including the assumption of debt, to add higher-end trips to its fleet of offerings. (nyti.ms/1vLl0Me)

* Home Depot Inc said on Tuesday that it was investigating a report that customer credit and debit card data was stolen from its systems and put up for sale online. The retailer issued a statement after Brian Krebs, an independent security reporter, said that multiple banks had pointed to Home Depot as the potential source of a large data breach. The company said it was working with law enforcement authorities and banks on the matter. (nyti.ms/1vLmkyU)

* IEX Group Inc, the stock trading platform created to temper high-frequency traders' advantages and profiled in Michael Lewis's book "Flash Boys" has raised $75 million in a new round of financing. That money will help the start-up become a full-fledged stock market. (nyti.ms/1vLrAT1)

Canada

THE GLOBE AND MAIL

* A new report is questioning the merits of the Canada Pension Plan Investment Board's increasing use of "active" investments to boost returns. In a Fraser Institute report to be released Wednesday, former Statistics Canada chief economic analyst Philip Cross and Fraser Institute fellow Joel Emes express concern that these new investments come with much higher costs that should be more clearly explained. (bit.ly/1ul5OCD)

* Canada has reached a compromise with North Atlantic Treaty Organization allies in which member states will commit to trying to increase defence spending to 2 percent of their annual economic output, rather than embracing a hard target for boosting military expenditures. (bit.ly/1lyAY9d)

Reports in the business section:

* Allen Chan, the Hong Kong-based businessman at the centre of the Ontario Securities Commission's (OSC) fraud allegations against Sino-Forest Corp, maintains he has done nothing dishonest, his lawyer told a packed hearing room on Tuesday. Chan - the company's former chairman and chief executive - along with four other former Sino-Forest executives, face OSC allegations they committed fraud and misled investors in the company, which once had a market capitalization of C$6 billion and a listing on the Toronto Stock Exchange. (bit.ly/1qnD4J3)

NATIONAL POST

* With a 42 percent share of the voting public, John Tory has emerged as the clear front-runner in the Toronto mayoral race as Olivia Chow languishes in third place, according to the results of a new poll. The Nanos Research poll shows Chow has the support of only 26 percent of the electorate, just behind the 28 percent held by sitting Mayor Rob Ford. (bit.ly/1qatedN)

* Toronto mayoral candidate Olivia Chow will raise money for more student nutrition programs and bus service by increasing the land transfer tax for houses over C$2-million - a scheme she said is aimed at making taxes more progressive. (bit.ly/1Cp96cO)

FINANCIAL POST

* Propel Capital Corp, which brought eight funds to markets, raising about C$400 million from mostly retail clients, was acquired by Montreal-based Fiera Capital Corp. The publicly listed buyer will pay about C$12 million for the right to manage the funds. At C$12 million the purchase price - which will be paid mostly in cash but also in stock, works out to be about 3 percent of assets under management. (bit.ly/1sZ4FyS)

* Canada's broadcast regulator has approved an application for a broadcast license by an extreme sports specialty channel, EDGEsport headed by the former chief executive of media conglomerate CanWest Global Communications. (bit.ly/1nVCZrn)

China

SHANGHAI SECURITIES NEWS

- Shanghai plans to consolidate the city's media sector by merging Bestv New Media Co Ltd and Shanghai Oriental Pearl Group Ltd, while injecting other unlisted media assets into the combined, listed company.

- Sohu.Com Inc has forayed into Internet financing by setting up a platform that facilitates lending between individuals and small- and medium-sized companies.

- China Securities Regulatory Commission spokesman Deng Ke said the recent strength in the country's stockmarket reflects improvements in the environment, including a stabilising economy, ample liquidity, effects of capital market reforms and lowering financing costs.

SECURITIES TIMES

- China's anti-monopoly watchdog slapped fines worth 110 million yuan ($17.8 million) on 23 property insurers over price-fixing. The National Development and Reform Commission said 23 insurers in China's eastern Zhejiang province were found to have colluded on discounts on car insurance premiums during multiple meetings organised by the Zhejiang insurance association.

Britain

The Times

CITY LAWYERS FACE ARREST IN CRACKDOWN ON LAUNDERING

Britain's elite criminal agency is planning a crackdown on money laundering in the City of London that is expected to lead to the arrest of lawyers linked to the movement and washing of billions of pounds of criminal proceeds. (http://thetim.es/1nSdIyj)

FINANCIAL OMBUDSMAN DEALS WITH 5,000 PPI COMPLAINTS A WEEK

Complaints about payment protection insurance remained the biggest problem the Financial Ombudsman Service dealt with this year as it revealed it waded through 5,000 grievances a week. (http://thetim.es/1BahiMx)

The Guardian

SKILLS SHORTAGE FEARS TEMPER SURGE IN UK CONSTRUCTION

Britain's builders enjoyed the strongest growth for seven months in August but the surge in activity put further strain on already tight supplies of materials and skilled workers. (http://bit.ly/1tXktEM)

BETFAIR ATTACKS PIRC'S QUESTIONING OF ACCOUNTS

A row has broken out between the corporate governance adviser Pirc and the online betting company Betfair Group Plc , with the bookmaker accusing the former of "materially misrepresenting" facts. (http://bit.ly/1vKOObU)

The Telegraph

INDEPENDENT SCOTLAND COULD NOT KEEP POUND AND JOIN EU

Scotland must choose between independence and keeping the pound if it wants to be part of the European Union, Olli Rehn, a top European official has warned. (http://bit.ly/1nTVexu)

EMERGENCY MEASURES TO PREVENT BLACKOUTS THIS WINTER AS POWER CRUNCH WORSENS

Emergency measures to fire up mothballed power stations could be used to keep the lights on this winter, after a series of power plant fires and closures left Britain more vulnerable to blackouts. (http://bit.ly/1qxnauG)

Sky News

CBI CAMPAIGN AIMS TO RESTORE TRUST IN UK PLC

Britain's biggest employers' lobbying group is mounting an attempt to rebuild public confidence in business just months before a general election campaign that is likely to include pledges to tackle private sector misconduct. (http://bit.ly/W6d1K3)

UBER TAXIS BANNED FROM OPERATING IN GERMANY

The Uber ridesharing service has been banned from operating in Germany pending a court hearing on whether it meets transport safety laws. (http://bit.ly/1x7BKiu)

The Independent

COMPANIES FACE PROSECUTION IF THEY FAIL TO STOP ECONOMIC CRIME

Firms will face huge fines for failure to report economic crime, under measures being considered by the government, the coalition's top legal officer said today. (http://ind.pn/1w2vlRf)

ROYAL MAIL TO TRIAL SUNDAY DELIVERIES THIS WEEKEND

The Royal Mail Plc is to implement a pilot scheme of Sunday deliveries and office openings this weekend with customers in London and surrounding towns set to receive packages through their doors. (http://ind.pn/1pkNN1O)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
ISM New York PMI for August at 9:45
Factory orders for July at 10:00--consensus up 10.9%
Beige Book to be released at 14:00

ANALYST RESEARCH

Upgrades

ABB (ABB) upgraded to Buy from Neutral at BofA/Merrill
Aviat Networks (AVNW) upgraded to Buy from Hold at Needham
Boulder Brands (BDBD) upgraded to Buy from Neutral at Longbow
CRH Plc. (CRH) upgraded to Neutral from Underweight at HSBC
Cinemark (CNK) upgraded to Buy from Hold at Stifel
PharMerica (PMC) upgraded to Outperform from Market Perform at Cowen
Quest Diagnostics (DGX) upgraded to Conviction Buy from Buy at Goldman

Downgrades

ASM International (ASMI) downgraded to Neutral from Overweight at JPMorgan
Alere (ALR) downgraded to Sell from Neutral at Goldman
American Tower (AMT) downgraded to Equal Weight from Overweight at Morgan Stanley
C.H. Robinson (CHRW) downgraded to Hold from Buy at Stifel
Concur (CNQR) downgraded to Neutral from Outperform at RW Baird
Echo Global (ECHO) downgraded to Sell from Hold at Stifel
Frontier downgraded to Underweight from Equal Weight at Morgan Stanley
Stericycle (SRCL) downgraded to Neutral from Buy at Goldman

Initiations

Advanced Drainage (WMS) initiated with a Buy at Deutsche Bank
Advanced Drainage (WMS) initiated with an Outperform at RBC Capital
Advanced Drainage (WMS) initiated with an Overweight at Barclays
Ally Financial (ALLY) initiated with a Buy at Drexel Hamilton
AmSurg (AMSG) initiated with a Neutral at Goldman
Ambarella (AMBA) initiated with an Outperform at Imperial Capital
Genco Shipping (GSKNF) initiated with a Buy at Jefferies
Hersha Hospitality (HT) initiated with a Sector Perform at RBC Capital
Knightsbridge Tankers (VLCCF) initiated with a Buy at Jefferies
Mood Media (FDMCF) initiated with an Outperform at Imperial Capital
Orion Engineered Carbons (OEC) initiated with a Buy at KeyBanc
Scorpio Bulkers (SALT) initiated with a Buy at Jefferies
Square 1 Financial (SQBK) initiated with a Buy at SunTrust
Star Bulk Carriers (SBLK) initiated with a Buy at Jefferies

COMPANY NEWS

Apple (AAPL) said no breach in iCloud or Find my iPhone. The company said "Certain celebrity accounts were compromised by a very targeted attack on user names, passwords and security questions, a practice that has become all too common on the Internet. None of the cases we have investigated has resulted from any breach in any of Apple’s systems including iCloud or Find my iPhone"
Netflix (NFLX) announced that Gotham to be released exclusively on Netflix
CVS (CVS) to change name to CVS Health, end tobacco sales early 
Wet Seal (WTSL) said CEO John Goodman leaves company, Edmond Thomas named as CEO
KKR (KKR) sold its stake in Versatel to United Internet for EUR 1.25B
Tetraphase (TTPH) announced positive data from lead-in portion of its IGNITE 2 clinical trial
Flextronics (FLEX) received shareholder approval to purchase up to 20% of its outstanding shares

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Toll Brothers (TOL), Guidewire (GWRE), eGain (EGAN), Vince Holding (VNCE), Box Ships (TEU)

Companies that missed consensus earnings expectations include:
Paragon Shipping (PRGN), Aviat Networks (AVNW)

Office Depot (ODP) backs FY14 sales to be lower than FY13 combined pro forma sales
Guidewire (GWRE) sees Q1 non-GAAP EPS 1c-5c, consensus 0c, sees FY15 EPS 35c-45c, consensus 55c. Sees Q1 revenue $71.5M-$ 78.5M, consensus $74.8M, sees FY15 revenue $364.2M-$381.9M, consensus $386.2M
PepsiCo (PEP) backs FY14 constant currency EPS growth guidance of 8%

NEWSPAPERS/WEBSITES

Concur (CNQR) explores sale, talks to SAP (SAP) and Oracle (ORCL), Bloomberg says
FBI hasn't found evidence JPMorgan (JPM) hack hit other big banks, WSJ reports
JPMorgan (JPM) in talks to sell oil-supply agreement to Bank of America (BAC), WSJ says
EBay (EBAY) hiring settlement with DOJ approved by judge, Reuters reports
Time Warner's (TWX) Warner Bros. studio said to plan buyout offers to boost profit, Bloomberg reports
Novartis (NVS) heart drug LCZ696 could drive shares to new highs, Barron's says

SYNDICATE

AerCap (AER) files to sell 29.85M ordinary shares for holders
CDW (CDW) commences public offering of 15M shares for holders
Capital Product (CPLP) announces offering of 15M common units
Ellington Financial (EFC) announces public offering of 8M common shares
GrubHub (GRUB) announces proposed follow-on offering of 10.03M shares
Martin Midstream Partners (MMLP) files to sell 6.26M common units for holders
Voya Financial (VOYA) announces secondary offering of 30M shares by ING

• Global stocks bounce on sign ECB could launch ABS program (Reuters)
• Putin unveils Ukraine ceasefire plan, France halts warship (Reuters)
• Poroshenko Flummoxes Investors With About-Face on Truce (BBG)
• No Free Lunch for Companies as IRS Weighs Meal Tax Rules (BBG)
• Turkey Struggles to Halt Islamic State 'Jihadist Highway' (WSJ)
• Lego Becomes World's Largest Toy Maker on Movie Success (WSJ)
• U.N. says $600 million needed to tackle Ebola as deaths top 1,900 (Reuters)
• Goldman Sachs Named 'Stabilization Agent' for Alibaba Stock Offering (WSJ)
• Computers for Hire Said to Send JPMorgan Data to Russia (BBG)
• Investment Technology Group to Launch Dark Pool for Bond Trading (WSJ)
• Britain considering arming, training Kurdish forces (Reuters)
• Suicide Every 40 Seconds Requires Prevention Measures (BBG)
• 'Humiliated' Dinesh D'Souza seeks probation after guilty plea (Reuters)

Overnight Media Digest

WSJ

* Russian President Vladimir Putin pushed a cease-fire deal with Ukraine that would freeze in place gains made by Russian-backed separatists, setting the stage for the kind of partitioning Moscow has used to tame other neighbors. (http://on.wsj.com/1oFMACc)

* Turkey is struggling to close a "jihadist highway" that lets foreign militants slip across its border into Syria, amid pressure from Western governments and mounting security fears at home. (http://on.wsj.com/1r4W5wk)

* Upending the U.S. senate race in Kansas, the Democratic candidate Chad Taylor has withdrawn from the contest, leaving Republican Sen. Pat Roberts with a narrowed field and a potentially formidable opponent in an independent candidate. (http://on.wsj.com/1rNAPl3)

* The football league Thursday Night Football now has huge leverage over television networks, which are increasingly looking to the NFL network to help fortify them against the rise of online video services and other threats. (http://on.wsj.com/1nZgSQQ)

* Economic activity largely picked up during the summer after hitting a soft patch at the start of the year, though the Federal Reserve's latest survey of regional conditions showed few signs of pressure on wages. (http://on.wsj.com/1oFIKca)

* Brokerage Investment Technology Group is opening an alternative trading venue for bonds in an effort to tap demand from investors to trade more cheaply and through electronic networks. (http://on.wsj.com/1nxAStT)

* Goldman Sachs Group Inc landed a coveted role in Alibaba Group Holding Ltd's <IPO-BABA.N> upcoming initial public offering as the bank in charge of overseeing the deal's early share trading. (http://on.wsj.com/1pLjXtl)

* UK pharmaceutical giant AstraZeneca Plc pulled out all the stops to fend off a hostile takeover from Pfizer Inc earlier this year, refusing to release certain financial statements and stirring up opposition from British politicians. (http://on.wsj.com/1t1Embb)

* Less than a year after leaving office as mayor of New York City, Michael Bloomberg will return as head of Bloomberg LP, the financial data and media firm he founded and still controls, the company announced on Wednesday. (http://on.wsj.com/1r4Seze)

* Tesla Motors Inc is expected to choose a site in Nevada for its proposed up to $5 billion battery factory and could disclose the move on Thursday, according to a person familiar with the electric auto maker's plans. (http://on.wsj.com/1uB4afx)

FT

The Association of British Insurers has accused the Bank of England of driving up the cost of insurance by imposing unnecessary capital requirements on the sector.

French luxury groups Hermes International SCA and LVMH reached a truce in a four-year dispute that began when LVMH began accumulating a large stake in its smaller rival.

British airline Virgin Atlantic is to beef up its core transatlantic services and stop flying to Tokyo, Mumbai, Vancouver and Cape Town, to help it try to reach a level of profitability.

Spirit Pub Company Plc, known for its pubs such as Chef & Brewer, Fayre & Square and Flaming Grill, will next month provide details regarding plans to add 400 pubs to its portfolio.

Anglo-Dutch business information provider Reed Elsevier Plc has offered to buy FircoSoft for 150 million euros ($197.24 million) marking the company's biggest acquisition till date.

NYT

* Michael Bloomberg told close confidants and senior executives of Bloomberg LP, a financial data and media company, that Daniel Doctoroff, its chief executive and a longtime friend and lieutenant, would leave the company at the end of the year and that he would take over. He has decided to reassume the leadership of his business empire only eight months after ending his final term as mayor of New York. (http://nyti.ms/1unfwEM)

* Stefan Green, formerly of Goldman Sachs Group Inc, has joined Perella Weinberg Partners as a partner. He will be based in San Francisco and will focus on providing strategic and financial advice to technology, media and telecommunications companies. (http://nyti.ms/1lIRe7W)

* Samsung Electronics Co Ltd is doubling down on big phones and clever design, announcing on Wednesday two new versions of its popular Note 4, one of which includes a unique curved design and features two separate touch screens. (http://nyti.ms/YcY9LZ)

* Federal regulators announced on Wednesday an overhaul of a murky Wall Street market that gained infamy during the financial crisis of 2008. The Federal Reserve and the Office of the Comptroller of the Currency, as well as three other agencies, proposed a rule that would apply to over-the-counter derivatives, the financial instruments that banks and other financial entities use to speculate or hedge their risks. (http://nyti.ms/1A7W6UQ)

* The governor of Nevada and Tesla Motors Inc, the electric car company with gigantic ambitions, will be "making an affirmative announcement" on Thursday about the construction of a huge battery factory, a person involved in the negotiations said on Wednesday. (http://nyti.ms/1Bcw71d)

* Though battered by the recall of millions of vehicles and revelations that it failed to fix a deadly defect in its ignition switches, General Motors Co maintained a monthly winning streak in selling vehicles since March. (http://nyti.ms/1rNw36T)

* A lawyer for Detroit city on Wednesday urged a judge to approve its blueprint for shedding $7 billion of its debts and devoting about $1.5 billion toward restoring city services over the next decade, describing the plan to emerge from bankruptcy as Detroit's "last, best chance" for a comeback. (http://nyti.ms/1A7X7wj)

Canada

THE GLOBE AND MAIL

** Manulife Financial Corp is acquiring the Canadian operations of Britain's Standard Life Plc in a C$4-billion deal that builds both insurers' wealth businesses and boosts Manulife's presence in Quebec. (bit.ly/1vQZpCg)

** Premier Christy Clark wants British Columbia teachers to suspend their strike and return to the bargaining table - though her attempt to bridge the divide was quickly rebuffed, and a comment about teachers' massage-benefit demands only drew the union's ire. Clark said teachers need to come to the table with a realistic proposal. (bit.ly/1oGz5SF)

** Stephen Holyday, the son of former Toronto deputy mayor Doug Holyday, is putting his name on the ballot for the seat once held by his father in Ward 3. Holyday, a manager with the Ontario Ministry of Energy and a long-time Etobicoke resident, registered on Wednesday. (bit.ly/1unpm9w)

NATIONAL POST

** Canadian engineering firm WSP Global Inc is buying New York City-based infrastructure specialist Parsons Brinckerhoff in a potentially transformative $1.35 billion deal as it pushes to bulk up amid continued industry consolidation. (bit.ly/1qqnAE7)

** The Nova Scotia government will introduce a legislation this fall to prohibit high-volume hydraulic fracturing for onshore shale gas. The ban is not directed at offshore energy developments. (bit.ly/1CsWOjz)

** Doctors at a major Toronto hospital, Sunnybrook Health Sciences Centre, violated the law by unilaterally imposing a do-not-resuscitate order on an elderly patient against his family's wishes, an appeal board has ruled in an extraordinary clash over end-of-life care. Douglas DeGuerre died from cardiac arrest, as his daughter, Joy Wawryzyniak, frantically tried to convince medical staff to save him, and health workers declined to help the severely ill war veteran. (bit.ly/1qqmd8v)

** Antonio Accurso, the construction magnate at the center of corruption and collusion allegations in Quebec, acknowledged Wednesday two members of the Rizzuto crime family were among the contacts he amassed over his decades in business.(bit.ly/1CsTViW)

Hong Kong

SOUTH CHINA MORNING POST

- Occupy Central co-founder Benny Tai Yiu-ting came out fighting on Wednesday after he shocked many with his pessimistic assessment of the pro-democracy movement in an interview. Tai said he was confident that as many as 10,000 people would join the upcoming mass sit-in in Central, a day after he suggested that public support for Occupy was waning. (http://bit.ly/1nwAImP)

- Hong Kong retained its seventh-place ranking for a second year in the annual Global Competitiveness Index released by the World Economic Forum, with middling scores on education and innovation preventing it from rising higher. (http://bit.ly/1lADBaw)

- Technology giant Apple is expected to provide a boost to exports from the mainland and Taiwan after the company's newest iPhone is launched next week. The release of iPhone 6 could add 1 percentage point a month to the mainland's export growth for the rest of this year, said a report by Bank of America Merrill Lynch. (http://bit.ly/1pKMVtu)

THE STANDARD

- Hong Kong construction contractor New Concepts opens its retail book on Thursday seeking to raise up to HK$90 million ($11.6 million) in an initial public offering to fund acquisition of machinery and equipment, and for hiring more staff. (http://bit.ly/1w832Rz)

- Luxury projects Kensington Hill and One South Lane were unveiled in west Hong Kong Island, priced about 10 percent higher than the prevailing market prices in the area. Wheelock Properties priced its first batch of 30 units of Kensington Hill at an average HK$23,572 ($3,041.55) per sellable square foot. (http://bit.ly/We5RnB)

- Shenguan Holdings, a mainland-based sausage-casing maker, has been accused by short-seller Emerson Analytics of exaggerating revenue and concealing high costs of raw materials. (http://bit.ly/We6eym)

HONG KONG ECONOMIC JOURNAL

- Chinese sportswear firm 361 Degrees International Ltd said it has teamed up with Baidu Inc's Baidu Times to jointly develop digitally enhanced sports products, including children's "Smart Shoes" equipped with GPS and pedometer functions.

HONG KONG ECONOMIC TIMES

- Headwear products maker Mainland Headwear Holdings Ltd expects orders for its Bangladesh factories to increase early next year as the facilities continue to expand, while wages there are only one-tenth of those in China with ample labour supply, according to deputy chairman Pauline Ngan.

MING PAO DAILY NEWS

- China Unicom said the China Banking Regulatory Commission has approved its plan to team up with the China Merchants Bank- controlled Wing Lung Bank to jointly develop online financial services on the mainland. The registered capital of the venture will amount to 2 billion yuan ($326 million).

Britain

The Times

REED ELSEVIER PAYS 120 MLN STG FOR SANCTIONS MONITOR

Reed Elsevier Plc has made its largest acquisition in three years, snapping up a French software company that monitors financial transactions to check that they are not breaching economic sanctions. (thetim.es/Z7ByR4)

 
DICKSON ON VIRGIN BOARD WITH FLOAT IN SIGHT

Olivia Dickson, a former JPMorgan banker, has joined Virgin Money (IPO-VMH.L) as a non-executive director, adding to speculation that the bank is sprucing itself up for a flotation within months. (thetim.es/1pnJi6x)

The Guardian

ZALANDO ONLINE FASHION GIANT VALUED AT UP TO 6 BLN EUROS IN FRANKFURT FLOAT

Zalando, Europe's biggest online fashion store, is planning to raise 500 million euros ($657.40 million) to fund expansion with a public listing on the Frankfurt stock exchange, which could value the firm at up to 6 billion euros. (bit.ly/1pIS2u0)

ROYAL MAIL SELL-OFF HELPS HARGREAVES LANSDOWN MAKE RECORD PROFITS

The founders of Hargreaves Lansdown Plc have reaped more than 68 million pounds in annual dividends after Royal Mail Plc's flotation boosted business at the investment company. (bit.ly/1pKl7W0)

The Telegraph

SCOTTISH 'YES' VOTE COULD CAUSE EUROZONE-STYLE CURRENCY CRISIS, GOLDMAN SACHS WARNS

Goldman Sachs has warned that the United Kingdom could fall into a eurozone-style crisis if Scotland votes for independence later this month. The Wall Street bank said a "Yes" vote on Sept. 18 "could have severe consequences" for both the Scottish economy and the United Kingdom overall. (bit.ly/1lyZZ40)

DOES BALFOUR'S SALE OF U.S. BUSINESS MEAN A CARILLION MERGER WILL NEVER HAPPEN?

Balfour Beatty Plc has sold its U.S. consultancy business Parsons Brinckerhoff for 820 million pounds, dealing a blow to a possible resurrection of Carillion Plc's 3 billion pounds merger with its British rival. (bit.ly/1qyXjCv)

Sky News

NPOWER ESCAPES SANCTION AS BILL PROBLEMS EASE

Energy regulator Ofgem says it will not be taking immediate action against nPower Ltd as it has met its initial targets to resolve a late-billing issue that affected customers. (bit.ly/1lIufdc)

ARMY PLACES 3.5 BLN STG ORDER FOR NEW ARMOURED VEHICLES WITH GENERAL DYNAMICS

The British Army is to get 589 armoured vehicles after the Ministry of Defence agreed a 3.5 billion pounds deal with U.S. defence firm General Dynamics Corp that will support 1,300 UK jobs. (bit.ly/1pqby8B)

The Independent

LVMH AND HERMES SETTLE FOUR-YEAR DISPUTE

French luxury groups Hermes International SCA and LVMH reached a truce in a four-year dispute that began when LVMH began accumulating a large stake in its smaller rival. (ind.pn/1A5HSE6)

TREASURY COMPLAINS OF BRAIN DRAIN TO BETTER-PAYING BANK AND HMRC

The Treasury's top mandarin has blamed higher salaries offered by the Bank of England and Her Majesty's Revenue and Customs for the finance department's chronic difficulties in holding on to promising employees. (ind.pn/1vM8pIR)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
ADP employment change for August at 8:15--consensus 220K
Jobless claims for week of August 30 at 8:30--consensus 300K
International trade balance for July at 8:30--consensus is ($42.3B)
Nonfarm productivity for Q2 at 8:30--consensus up 2.4%
Unit labor costs for Q2 at 8:30--consensus up 0.5%
Markit services PMI for August at 9:45--consensus 58.5
ISM non-manufacturing index for August at 10:00--consensus 57.5

ANALYST RESEARCH

Upgrades

D.R. Horton (DHI) upgraded to Buy from Neutral at UBS
IAC (IACI) upgraded to Overweight from Equal Weight at Barclays
Imperial Tobacco (ityby) upgraded to Outperform from Underperform at Exane BNP Paribas
Infinity upgraded to Outperform from Market Perform at JMP Securities

Downgrades

3D Systems (DDD) downgraded to Sector Perform from Outperform at Pacific Crest
BASF (BASFY) downgraded to Underperform from Neutral at Credit Suisse
British American Tobacco (BTI) downgraded to Neutral at Exane BNP Paribas
Essex Property Trust (ESS) downgraded to Neutral from Buy at UBS
GoPro (GPRO) downgraded to Neutral from Overweight at JPMorgan
Informatica (INFA) downgraded to Equal Weight from Overweight at Barclays
Ironwood (IRWD) downgraded to Market Perform from Outperform at Cowen
Norwegian Cruise Line (NCLH) downgraded to Neutral from Buy at Goldman
Tangoe (TNGO) downgraded to Equal Weight from Overweight at Barclays
Teradata (TDC) downgraded to Equal Weight from Overweight at Barclays

Initiations

ANSYS (ANSS) initiated with an Equal Weight at Barclays
American Realty (ARCP) initiated with a Market Perform at Wells Fargo
Annie's (BNNY) initiated with an Outperform at Oppenheimer
Ball Corp. (BLL) initiated with a Market Perform at BMO Capital
Bemis (BMS) initiated with a Market Perform at BMO Capital
Berry Plastics (BERY) initiated with a Market Perform at BMO Capital
Boulder Brands (BDBD) initiated with an Outperform at Oppenheimer
Crown Holdings (CCK) initiated with an Outperform at BMO Capital
Domtar (UFS) initiated with an Outperform at BMO Capital
Enservco (ENSV) initiated with a Buy at Maxim
Foot Locker (FL) initiated with a Buy at Jefferies
Glatfelter (GLT) initiated with a Market Perform at BMO Capital
Graphic Packaging (GPK) initiated with an Outperform at BMO Capital
Greif (GEF) initiated with a Market Perform at BMO Capital
International Paper (IP) initiated with a Market Perform at BMO Capital
LTC Properties (LTC) initiated with a Buy at Mizuho
Louisiana-Pacific (LPX) initiated with an Outperform at BMO Capital
National General (NGHC) initiated with an Outperform at JMP Securities
National Health Investors (NHI) initiated with a Neutral at Mizuho
Owens-Illinois (OI) initiated with an Outperform at BMO Capital
Packaging Corp. (PKG) initiated with an Outperform at BMO Capital
Plum Creek Timber (PCL) initiated with a Market Perform at BMO Capital
RadiSys (RSYS) initiated with a Buy at DA Davidson
Rayonier (RYN) initiated with a Market Perform at BMO Capital
RockTenn (RKT) initiated with a Market Perform at BMO Capital
Sealed Air (SEE) initiated with an Outperform at BMO Capital
Silgan Holdings (SLGN) initiated with a Market Perform at BMO Capital
Sonoco (SON) initiated with a Market Perform at BMO Capital
TripAdvisor (TRIP) initiated with a Fair Value at CRT Capital
Vertex Energy (VTNR) initiated with an Outperform at Imperial Capital
Weyerhaeuser (WY) initiated with an Outperform at BMO Capital
WhiteWave Foods (WWAV) initiated with an Outperform at Oppenheimer

COMPANY NEWS

Johnson & Johnson (JNJ) to fast-track development of Ebola combination vaccine regimen
Yum! Brands (YUM) forecast China division SSS for Q3 down 13% vs. prior year
TIBCO (TIBX) announced that its board will review strategic alternatives
Teledyne (TDY) said it will acquire Bolt Technology (BOLT) for $22 per share in cash Teledyne also entered into a $100M accelerated share repurchase agreement
Morgans Hotel (MHGC) disclosed that the special transaction committee has directed Morgan Stanley (MS) to reach out to possible counterparties regarding their interest in potential transactions that could provide Morgans an opportunity to maximize value for its stockholders
Costco (COST) reported August SSS up 7%
PG&E (PCG) said it plans to appeal $1.4B fine by CPUC

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Methode Electronics (MEI), Dominion Diamond (DDC), ABM Industries (ABM), PVH Corp. (PVH), Christopher & Banks (CBK), Bazaarvoice (BV), LightPath (LPTH)

Companies that missed consensus earnings expectations include:
Descartes Systems (DSGX), Joy Global (JOY), Matrix Service (MTRX), AeroVironment (AVAV), Mitcham Industries (MIND), Iteris (ITI), Shoe Carnival (SCVL)

Companies that matched consensus earnings expectations include:
H&R Block (HRB)

NEWSPAPERS/WEBSITES

Home Depot (HD) data breach involves nearly all U.S. stores, Krebs reports
Ichan exits Family Dollar (FDO) position with $200M profit, Reuters reports
Symantec (SYMC), FishNet enlisted by Home Depot (HD) for breach probe, Bloomberg says
Tesla (TSLA) picks Nevada for gigafactory, WSJ reports
Goldman (GS) overseeing early share trading in Alibaba (BABA) IPO, Reuters reports
MetLife (MET) to meet with regulators to decide if 'too big to fail,' NY Post reports
Gannett's (GCI) USA Today cuts 70 employees, WSJ reports
Toll Brothers (TOL) looks unattractive, Barron's says

SYNDICATE

Allison Transmission (ALSN) sells 5.39M shares by holders
Arlington Asset Investment (AI) offers 2.75M shares of Class A common stock
Buckeye Partners (BPL) 6.75M share Secondary priced at $80.00
Chesapeake Lodging (CHSP) announces offering of 4.2M common shares
Memorial Production (MEMP) offers 13M common units
Northstar Realty (NRF) files to sell 45M shares with a foward component
Pebblebrook Hotel (PEB) files to sell 3M shares of common stock
Summit Midstream (SMLP) offers 4M common units owned by SMP Holdings
Sunoco Logistics (SXL) files to sell $1B common units

• Euro left reeling after ECB's liquidity splurge (Reuters)
• Coalition Emerges to Battle Islamic State Militants (WSJ)
• Ukraine Gas Chief Takes on Gazprom in Race With Winter (BBG)
• Nato leaders fail to agree spending targets (FT)
• JPMorgan Had Exodus of Tech Talent Before Hacker Breach (BBG)
• Mercedes-Benz Sales Rise Despite Weak German Demand (WSJ)
• Secret Network Connects Harvard Money to Payday Loans (BBG)
• ICE looks to crack financial data market (FT)
• Pakistan opposition in talks with government to end political crisis (Reuters)
• Kids Slapped With 192-Pound Weight Tilt Qantas Plane Nose (BBG)
• Barclays, BofA, Citigroup Sued for ISDAfix Manipulation (BBG)
• Al-Qaeda in India Tests Modi’s Bid to Unite Muslims, Hindus (BBG)
• Uber’s ’Small Change’ Ban Reply May Anger German Judges (BBG)
• Virginia ex-governor, wife found guilty in corruption trial (Reuters)

Overnight Media Digest

WSJ

* American allies including the UK and France said they would help form an international military coalition to fight a growing threat from Islamic State militants. (http://on.wsj.com/1t6Kyi7)

* A hacker broke into part of the HealthCare.gov insurance enrollment website in July and uploaded malicious software, according to federal officials. Investigators found no evidence that consumers' personal data were taken or viewed during the breach, federal officials said. The hacker appears only to have gained access to a server used to test code for HealthCare.gov, the officials said. (http://on.wsj.com/Z8RXoB)

* Apple Inc said it plans additional steps to keep hackers out of user accounts. In his first interview on the subject, Apple Chief Executive Tim Cook said celebrities' iCloud accounts were compromised when hackers correctly answered security questions to obtain their passwords or when they were victimized by a phishing scam to obtain user IDs and passwords. He said none of the Apple IDs and passwords leaked from the company's servers. (http://on.wsj.com/1puYPl3)

* Nvidia Corp opened a new front in the recent legal wars over mobile technology, filing suits accusing Samsung Electronics Co Ltd and Qualcomm Inc of infringing patents that cover graphics chips. (http://on.wsj.com/1BfcsxB)

* The dollar hit its highest level in nearly six years against the yen Friday following the European Central Bank's surprise rate move overnight and as monetary policy in the United States and Japan hits a fork in the road. (http://on.wsj.com/WiV5MC)

* BP Plc was grossly negligent in the 2010 Deepwater Horizon disaster, a federal judge ruled, handing down a decision that could cost the company as much as $18 billion in pollution fines for the Gulf of Mexico oil spill. (http://on.wsj.com/1pQrgzX)

* The credit-card industry is accelerating efforts to keep sensitive customer information out of the hands of merchants, as a rash of data breaches at major U.S. retailers erodes confidence in electronic payment systems. Visa Inc and MasterCard Inc are rolling out technology that replaces cardholder information such as account numbers and expiration dates with a unique series of numbers that validates the customer's identity. (http://on.wsj.com/1Bf9Vn3)

* Google Inc has agreed to settle a Federal Trade Commission complaint that it allowed children to rack up millions of dollars in charges in its mobile app store without their parents' knowledge or consent. Google will refund a minimum of $19 million to consumers whose children made purchases inside applications downloaded from the Google Play app store. Google will also modify its billing practices to ensure it obtains express consent before charging consumers for items sold in mobile apps. (http://on.wsj.com/Z9z6JZ)

* New York City Mayor Michael Bloomberg finds himself in a very different situation as he comes back to run Bloomberg LP. The media company is hardly in crisis. It has solidified its position as a dominant provider of financial information, and its revenue and subscribers have jumped sharply in recent years. There are threats looming, however. Bloomberg is returning to a more competitive marketplace than the one he left in 2002 and to increasingly strained relations with the financial institutions that make up the company's core customer base. (http://on.wsj.com/1AcQtow)

* Caterpillar Inc's Progress Rail subsidiary, the subject of a federal criminal investigation, has lost railcar-repair contracts at some of the nation's busiest railroad terminals, including the ports of Long Beach and Los Angeles. (http://on.wsj.com/1qB6P8b)

* A panel of top regulators Thursday proposed giving MetLife Inc tougher government oversight, bringing the insurer and regulators a step closer to a possible legal showdown. The Financial Stability Oversight Council, led by the Treasury secretary, voted to propose labeling a nonbank financial company as "systemically important," the panel said in a statement released after a closed-door meeting. MetLife acknowledged it was the unnamed firm. (http://on.wsj.com/YgjZhy)

* U.S. regulators on Thursday approved a new kind of cancer drug from Merck & Co Inc that is designed to unleash the body's immune system against tumors. The drug is part of a long-anticipated wave of medicines that could transform cancer treatment and forge a large new market for pharmaceutical companies. (http://on.wsj.com/1ptUM8z)

* Walgreen Co scrambled to notify thousands of customers who had their prescriptions filled during a recent system crash, because errors might have left their labels unreadable. The drugstore chain found that its systems were printing labels with random characters in the instructions, making some hard to understand, said Chuck Greener, a spokesman for the company. (http://on.wsj.com/1oKFaNS)

* Steven Spielberg has hired Michael Wright, a cable-television veteran with no film-business experience to run his struggling studio DreamWorks SKG. Wright, who recently left his post as head of programming for TNT, TBS and Turner Classic Movies amid strategy changes at Time Warner Inc's cable-TV unit, was named chief executive of DreamWorks on Thursday. (http://on.wsj.com/1o4eDMn)

FT

A U.S. court has ruled against BP Plc accusing it of gross negligence and wilful misconduct in the Deepwater Horizon disaster in 2010 that killed 11 people and caused the world's largest offshore oil spill, exposing it to fines of up to $18 billion.

Barclays Plc has become the first bank in the United Kingdom to launch a scanner that identifies customers by the unique vein patterns in their fingers, as the bank seeks to ramp up its fight against cyber crime and fraud.

The United Kingdom is moving to scale up its operations against the ISIL in Iraq after meeting with world leaders and members of NATO at the NATO summit in Wales and efforts in Westminster to begin generating support for more intervention.

Germany's telecom regulator and the European Commission are all set for a "war" over mobile termination fees, which generate millions of euros for some of Europe's largest cellular operators.

Mario Draghi startled markets on Thursday cutting interest rates to a record low and pledging to buy hundreds of billions of euros of private sector bonds in a dramatic move to save the eurozone from economic stagnation.

NYT

* After pitting five potential host states against one another in a quest for hundreds of millions of dollars in incentives, Tesla Motors Inc said Thursday that it had struck a deal with Nevada for construction of its sprawling factory to build batteries for electric cars and the power grid. (http://nyti.ms/1qsjADc)

* A federal judge determined that the BP Plc's conduct made it chiefly responsible for the oil well blowout in the Gulf of Mexico that killed 11 workers. United States District Court Judge Carl Barbier opened the possibility of $18 billion in new civil penalties for BP, nearly quadruple the maximum Clean Water Act penalty for simple negligence and far more than the $3.5 billion the company has set aside. (http://nyti.ms/1u4g3Mz)

* On Tuesday, Apple Inc will unveil a set of long-anticipated products: two iPhones with larger screens and a wearable computer that the media has nicknamed the iWatch. The so-called smartwatch, which is expected to include fitness tracking and wireless payment, will be the first new product unveiled under Chief Executive Tim Cook, who replaced Steve Jobs in 2011. (http://nyti.ms/1qiKJZo)

* The Food and Drug Administration on Thursday approved the first of an eagerly awaited new class of cancer drugs that unleashes the body's immune system to fight tumors. The drug, which Merck & Co Inc will sell under the name Keytruda, was approved for patients with advanced melanoma who have exhausted other therapies. (http://nyti.ms/1vUL9s3)

* Puerto Rico's electric power authority, which has been in negotiations with lenders over its debt burden, said on Thursday that it had hired the consulting firm AlixPartners to supervise its restructuring. (http://nyti.ms/1txvYEw)

* A federal panel is proposing to assign MetLife Inc to a club it does not want to join, by initially voting on Thursday to deem it a "systemically important financial institution" and thus subjecting it to more intensive regulation than most other life insurers. (http://nyti.ms/1Cw7XQD)

* Hackers breached security at the website of the government's health insurance marketplace, HealthCare.gov, but did not steal any personal information on consumers, Obama administration officials said Thursday. (http://nyti.ms/1o3Ylms)

* Mario Draghi, the president of the European Central Bank, said on Thursday that the bank would soon start to buy bonds that are backed by loans made to consumers and companies. He did not say how much the central bank would be willing to spend on these loan-backed bonds. But the purchases could make up a substantial share of the roughly 1 trillion euros, or $1.3 trillion, that Draghi implied that the bank was prepared to spend. (http://nyti.ms/1Cw9pm4)

Canada

THE GLOBE AND MAIL

** The long-held dream of boosting exports of Alberta crude to Asia by the decade's end is fading, as multibillion-dollar pipelines get bogged down by local opposition and regulatory wrangling. Enbridge Inc signaled Thursday that its contentious Northern Gateway pipeline to the west coast is unlikely to start up by 2018 as planned. (bit.ly/1ty0bDo)

** Regulators in the United States have officially granted permission for the first human clinical trial of Canada's experimental Ebola vaccine. NewLink Genetics Corp, the Iowa-based drug company the public health agency of Canada licensed to produce the vaccine, announced Thursday that it has received approval from the U.S. Food and Drug Administration to start Phase 1 safety trials. (bit.ly/1wbmqwZ)

NATIONAL POST

** Canadian liquefied natural gas may soon be lighting up Hawaii, if plans to ship the super-chilled gas to the Pacific island state come to fruition. As 16 LNG consortiums consider investments on the West Coast, Kelowna, British Columbia-based FortisBC Energy Inc is expected to beat the traffic and start supplying LNG to Hawaiian Electric Company under a 15-year agreement starting mid-2017, subject to regulatory approvals. (bit.ly/1rcydH4)

** Canadian exports to the European Union have climbed a whopping 40 percent in the past year, more than double the increase in the value of shipments to the United States during the same period - although far behind our largest trading partner in total money terms. As impressive as the latest export numbers are, they do mask recent troubling developments in the EU economy. (bit.ly/1qjG21t)

** Mayor Rob Ford's campaign team accidentally released the mayor's wildly quixotic C$9 billion ($8.28 billion) transit plan online Tuesday night, hours before the mayor was due to make a rare policy announcement. The document was unavailable on the mayor's campaign website Wednesday morning, just minutes before the mayor was due to speak at his campaign headquarters. (bit.ly/1uCPzA0)

** Rob Ford has been subpoenaed to testify in an upcoming extortion trial linked to his use of crack cocaine. The mayor confirmed Thursday that a homicide detective personally served him with the subpoena at his home some time in the past several weeks. Ford said he could not remember exactly when the summons arrived, nor could he say when he was expected to appear in court. (bit.ly/YgIds3)

China

SHANGHAI SECURITIES NEWS

- China's anti-monopoly drive is continuing to gain pace, the official paper said on Friday, after the country's anti-trust agencies have shone the spotlight recently on sectors including medical devices, computer software and automotive.

CHINA SECURITIES JOURNAL

- China's National Energy Administration (NEA) released another measure on Thursday to subsidize the country's hard-hit solar companies.

21st CENTURY BUSINESS HERALD

- China's far-western Xinjiang region will focus on developing its transportation industry in its thirteenth five-year plan, the local branch of the National Development Regulatory Commission (NDRC) said on Thursday.

CHINA DAILY

- The number of tourists visiting China is dropping, with the capital Beijing seeing a 6 percent fall in the first seven months of 2014, the China National Tourism Administration said.

- Chinese tourists spent $47 billion more overseas than the amount spent by foreign visitors in China in the first half of this year, according to a report by the Chinese Tourism Academy.

SHANGHAI DAILY

- China plans to overhaul its strict examination system in schools and universities by 2020, according to a notice from the country's State Council on Thursday. The reforms are aimed at easing the pressure on Chinese students.

- A traditional Chinese medicine (TCM) doctor has been detained after scamming patients out of 6 million yuan($977,469), a local Shanghai procuratorate said on Thursday.

Britain

The Times

PENNYCOOK TO LEAD CO-OP AFTER WINNING 'HEARTS AND MINDS'

The Co-operative Group has named Richard Pennycook, the interim boss who had previously counted himself out of the running for the top job, as new Chief Executive as it attempts to rebuild its reputation after a series of damaging financial crises. (http://thetim.es/1r9ULrO)

LET US COME HOME, SAY BRITISH JIHADISTS

Dozens of British jihadists have become so disillusioned with fighting in Syria that they have contacted the UK begging to come home. One jihadist, claiming to represent 30 Britons, approached an intermediary to complain of growing despondency among the men in his group. (http://thetim.es/1xhiW0p)

The Guardian

CBI FORECASTS SLOWING GROWTH FOR UK ECONOMY

Economic growth will slow in the second half of the year as the effect of improved confidence and better credit conditions starts to wear off, the CBI has predicted. (http://bit.ly/1prHIRl)

INVESTORS FIRE WARNING SHOT AT BETFAIR EXECUTIVE BONUSES

Nearly a third of shareholders in online betting exchange Betfair on Thursday voted against pay and bonus deals for Chief Executive Breon Corcoran. (http://bit.ly/1r9WygG)

The Telegraph

ROGUE TRADER JEROME KERVIEL TO LEAVE PRISON JUST 110 DAY INTO THREE-YEAR SENTENCE

Convicted rogue trader Jerome Kerviel has been told he can walk free from prison just 110 days into a three-year sentence. The former Societe Generale banker, who took the French lender to the brink of collapse with a series of risky bets, will be released from Fleury Merogis prison, just south of Paris, next week, an appeals court said yesterday. (http://bit.ly/Z93rZ9)

PHONES4U DEBTS UNDER REVIEW FOR DOWNGRADE AFTER SPLIT WITH VODAFONE

Phones4U suffered a new blow on Thursday as the ratings agency Moody's warned clients the mobile phone retailer was under review for a downgrade, a measure that could make more difficult for the heavily-indebted company to raise funds. (http://bit.ly/1AbW2Ud)

Sky News

NUCLEAR REACTORS MAY BE OFFLINE UNTIL 2015

Four nuclear reactors, which each provide 1 percent of Britain electricity, could be out of action until the end of the year due to safety fears. The announcement by EDF Energy, which owns the Heysham 1 and Hartlepool power stations, raised further concerns about the chances of blackouts during the winter following confirmation of actions to secure supplies by the National Grid. (http://bit.ly/1oIf6mz)

EUROZONE TEETERS AS ECB'S BAZOOKA IS HELD BACK

The European Central Bank's shock interest cut on Thursday, taking its benchmark policy rate from 0.15 percent to 0.05 percent, created drama on currency markets, sending the euro down against the US dollar by almost a full percentage point - a move seldom seen - to its lowest level for 14 months. (http://bit.ly/1r8QipB)

The Independent

CO-OP REVIVAL COULD TAKE FIVE YEARS, SAYS NEW CHIEF EXECUTIVE

Repairing the beleaguered Co-operative Group after two years of turmoil could take up to five years, the company's new head Richard Pennycook warned on Thursday. (http://ind.pn/1qg4WiC)

BRITISH OIL GIANT ACCUSED OF BRIBERY IN TUSSLE OVER AFRICA'S OLDEST NATIONAL PARK

Contractors and agents working on behalf of London-based oil company Soco International paid bribes to officials and rebels in the Democratic Republic of Congo in their bid to explore for oil in Africa's oldest national park, according to anti-corruption activists. (http://ind.pn/1tvlAgn)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Nonfarm payrolls for August at 8:30--consensus up 230K
Unemployment rate for August at 8:30--consensus 6.1%

ANALYST RESEARCH

Upgrades

AllianceBernstein (AB) upgraded to Neutral from Underperform at BofA/Merrill
BP (BP) upgraded to Buy from Neutral at Citigroup
Banco de Chile (BCH) upgraded to Overweight from Neutral at JPMorgan
Ciena (CIEN) upgraded to Buy from Neutral at Goldman
Intralinks (IL) upgraded to Buy from Hold at Stifel
Matrix Service (MTRX) upgraded to Overweight from Equal Weight at First Analysis
SanDisk (SNDK) upgraded to Overweight from Equal Weight at Morgan Stanley
Southern Company (SO) upgraded to Outperformer from Sector Performer at CIBC
Statoil (STO) upgraded to Neutral from Underweight at HSBC
Vertex (VRTX) upgraded to Buy from Neutral at Goldman

Downgrades

Alaska Air (ALK) downgraded to Market Perform from Outperform at Raymond James
Coca-Cola HBC (CCHGY) downgraded to Neutral from Buy at Goldman
Finisar (FNSR) downgraded to Buy from Strong Buy at Needham
LMI Aerospace (LMIA) downgraded to Hold from Buy at Deutsche Bank
Take-Two (TTWO) downgraded to Neutral from Buy at Sterne Agee
VeriFone (PAY) downgraded to Market Perform from Outperform at Raymond James

Initiations

Actavis (ACT) initiated with a Buy at ISI Group
Air Canada (AIDIF) initiated with an Outperform at Imperial Capital
Akamai (AKAM) initiated with a Buy at UBS
Alexion (ALXN) initiated with a Buy at SunTrust
Allegion (ALLE) initiated with a Buy at Buckingham
Allergan (AGN) initiated with a Buy at ISI Group
America's Car-Mart (CRMT) initiated with a Hold at Jefferies
Astronics (ATRO) initiated with a Buy at DA Davidson
Bonanza Creek (BCEI) initiated with an Outperform at Imperial Capital
Celgene (CELG) initiated with a Buy at SunTrust
Consumer Portfolio (CPSS) initiated with a Buy at Jefferies
Credit Acceptance (cacc) initiated with a Hold at Jefferies
EZCORP (EZPW) initiated with a Hold at Jefferies
Eaton (ETN) initiated with a Neutral at Buckingham
First Cash Financial (FCFS) initiated with a Hold at Jefferies
GSV Capital (GSVC) initiated with an Outperform at JMP Securities
Incyte (INCY) initiated with a Buy at SunTrust
Ingersoll-Rand (IR) initiated with a Neutral at Buckingham
Insmed (INSM) initiated with an Outperform at Cowen
Intercept (ICPT) initiated with an Outperform at Cowen
JGWPT Holdings (JGW) initiated with a Buy at Jefferies
Lennox (LII) initiated with a Neutral at Buckingham
Mylan (MYL) initiated with a Hold at ISI Group
NBT Bancorp (NBTB) initiated with a Neutral at Sterne Agee
Parker-Hannifin (PH) initiated with a Buy at Buckingham
Pentair (PNR) initiated with a Neutral at Buckingham
Pharmacyclics (PCYC) initiated with a Neutral at SunTrust
Plum Creek Timber (PCL) initiated with an Overweight at JPMorgan
Regional Management (RM) initiated with a Buy at Jefferies
Sabre (SABR) initiated with an Outperform at Oppenheimer
Santander Consumer (SC) initiated with a Buy at Jefferies
SpartanNash (SPTN) initiated with a Hold at Jefferies
Springleaf (LEAF) initiated with a Buy at Jefferies
Teva (TEVA) initiated with a Buy at ISI Group
Valeant (VRX) initiated with a Buy at ISI Group
Weyerhaeuser (WY) initiated with a Neutral at JPMorgan
World Acceptance (WRLD) initiated with a Hold at Jefferies
bluebird bio (BLUE) initiated with a Buy at SunTrust

COMPANY NEWS

Tesla (TSLA) officially selected Nevada as official site for battery gigafactory
MetLife (MET) said it "strongly disagrees" with the Financial Stability Oversight Council's preliminary designation of MetLife as a SIFI. "MetLife is not systemically important under the Dodd-Frank Act criteria," the company said
SandRidge (SD) announced a $200M share repurchase program
Gap (GPS) said August SSS declined 2%
FDA removed partial clinical hold on OncoMed (OMED) ipafricept

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
ACETO (ACET), Ambarella (AMBA), Culp (CFI), El Pollo Loco (LOCO), Verint Systems (VRNT), Infoblox (BLOX), SeaChange (SEAC), Zumiez (ZUMZ)

Companies that missed consensus earnings expectations include:
bebe stores (BEBE)

Companies that matched consensus earnings expectations include:
Cooper Companies (COO), Finisar (FNSR)

NEWSPAPERS/WEBSITES

Apple (AAPL) plans to warn users of attempts to hack iCloud, WSJ reports
Warner Bros. (TWX) to eliminate jobs 'at every level' across studio, Deadline Hollywood reports
New Dollar General (DG) offer might not woo Family Dollar (FDO), Reuters reports
Microsoft (MSFT), competitors aim to halt Google (GOOG) EU agreement, Reuters reports
HP (HPQ) considered pulling out of Autonomy deal, FT reports
Joy Global (JOY) current price may be good entry, Barron's says

SYNDICATE

Golar LNG (GLNG) offers 27.83M shares of common stock by World Shipholding
Golden Minerals (AUMN) announces proposed common stock, warrant offering
Harvest Natural (HNR) enters $75M equity distribution agreement
Michael Kors (KORS) offers 11.63M shares for Sportswear Holdings
PennantPark (PNNT) offers 11M shares of common stock
Sempra Energy (SRE) files automatic mixed securities shelf
Sensata (ST) offers 15.05M ordinary shares for holders
Tumi (TUMI) offers 8M shares of common stock for holders
iStar Financial (STAR) files automatic mixed securities shelf

• Scotland split jitters send sterling to 10-month low (Reuters)
• S&P 500 Beating World Most Since 1969 Doesn’t Spark Flows (BBG)
• Happy ending guaranteed: Vietnam building deterrent against China in disputed seas with submarines (Reuters)
• China Posts Record Surplus as Exports-Imports Diverge (Bloomberg)
• Russia, U.S. to hold talks on 1987 arms accord (Reuters)
• Halcon’s Wilson Drills More Debt Than Oil in Shale Bet (BBG)
• Deadly Disappointment Awaits at Ebola Clinics Due to Lack of Space (WSJ)
• Latinos furious at Obama on immigration delay, vow more pressure (Reuters)
• Japan GDP Shrinks at Fastest Pace in More Than Five Years (WSJ)
• U.S. air strikes target insurgents near Iraq's Haditha Dam (Reuters)
• SEC Preps Mutual Fund Rules (WSJ)
• China's Use of Antimonopoly Law May Violate Its WTO Commitments (WSJ)
• U.K.’s Big Banks Cut Lending by $595 Billion, KPMG Says (BBG)
• Should Venezuela Default? (ProSyn)
• Zoolander Was Wrong: Why Phones Are Getting Bigger, Not Smaller (BBG)
• Former New Orleans Mayor to start jail sentence for graft (Reuters)

Overnight Media Digest

WSJ

* President Barack Obama will lay out plans this week for expanding the U.S. military campaign against the extremist group Islamic State, including the possibility of airstrikes on the militants in their Syrian strongholds, U.S. officials said. (http://on.wsj.com/1lQa9NW)

* Can the U.S. compete internationally? Its companies can. Its workers cannot. That is the key finding from a new survey of Harvard Business School alumni that delves into their views of the U.S. business environment to see where the nation thrives and where it falters. (http://on.wsj.com/1rs8jiE)

* In recent years, Americans have been spared the sticker shock of paying full price for a new iPhone because wireless operators offered upfront discounts approaching $500 a phone. But Apple Inc faces an uncertain new environment this week as it prepares to unveil new- and what are expected to be more expensive-iPhones. Carriers have been weaning consumers off subsidies and getting them to pay full price for new devices. (http://on.wsj.com/1quAMrS)

* The Securities and Exchange Commission is preparing new rules to boost oversight of mutual funds, hedge funds and other firms as part of an effort to gain insight into whether the $50 trillion asset-management industry poses risks to the financial system, according to people familiar with the discussions. (http://on.wsj.com/1qyKj13)

* A fast-growing Virginia laboratory has collected hundreds of millions of dollars from Medicare while using a strategy that is now under regulatory scrutiny: It paid doctors who sent it patients' blood for testing. (http://on.wsj.com/1ohdXDd)

* Those hoping for a Goldilocks economy (not too hot, not too cold) got a boost from Friday's softer-than-expected August jobs numbers. Concerns had been spreading that strong job creation would push the Federal Reserve to raise interest rates as soon as March 2015, instead of June or September as most forecasters currently expect. Strong job creation is good for the public, but rate increases are bad for stocks and bonds, so the soft report was a relief to Wall Street. (http://on.wsj.com/1rrVNj2)

* Alibaba Group Holding Ltd <IPO-BABA.N> and its bankers have been talking with investors about the Chinese e-commerce giant's potentially $24 billion initial public offering for over a year. But this week, as they begin the formal sales pitch, they will seek to resolve a crucial question: How much stock do investors want to own, and what will they pay for it? (http://on.wsj.com/1quZ9Wu)

* General Motors Co plans to launch by 2016 cars with a hands-free automated driving system and Wi-Fi-enabled vehicle-to-vehicle communications systems designed to help avoid collisions, intensifying the race among the world's auto makers to build cars that can partially drive themselves and avoid crashes without the help of their human drivers. (http://on.wsj.com/1w5yXVz)

* Japan's biggest online shopping mall, Rakuten Inc , has reached a basic agreement to buy U.S. cashback-shopping website operator Ebates for about 100 billion yen ($951.75 million) to better access U.S. consumers and grow abroad, a person familiar with the matter said Sunday. (http://on.wsj.com/1rs2X6U)

* When top Netflix Inc executives arrived in Paris earlier this year to help prepare a European expansion, they were greeted with an open letter from a group of French film producers warning of an "implosion of our cultural model." Netflix's response was a charm offensive. In a series of meetings with French government officials, executives said they planned to inject tens of millions of euros into France by marketing the Netflix service, striking deals for older French movies and TV shows and eventually shooting an original, French-language TV series set in the country, according to people who attended the meetings. (http://on.wsj.com/1uFxUYE)

* While BP Plc has pledged to fight a federal judge's ruling that it acted recklessly in the fatal 2010 Deepwater Horizon explosion and spill, Thursday's decision may ratchet up pressure for it to pursue a different tack: settle. A federal judge's ruling that BP recklessly failed to heed warning signs ahead of the Deepwater Horizon disaster may ratchet up pressure on the oil giant to settle rather than face an up to $18 billion fine. (http://on.wsj.com/1udznXN)

* Walgreen Co, facing mounting pressure from analysts and shareholders, said it is giving activist investor Jana Partners LLC two board seats, a relatively large say for a shareholder with a little more than 1 percent of the company's stock. (http://on.wsj.com/1udzH91)

FT

The UK government sent a filing to the U.S. Supreme Court arguing over the $18 billion fine imposed on BP PLC. The UK government said, the company was being forced to pay a huge sum of money to individuals and businesses who were not particularly affected by the spill.

Michel Barnier, the European Union commissioner said that the bankers' cash allowances were wrongly classified as fixed pay as they are paid selectively to senior staff, and are limited in duration and get cancelled sometimes.

European oil group Royal Dutch Shell Plc and a sovereign wealth fund from Oman are investing $53 million into California based Glasspoint, a small solar power company that increases crude oil production using renewable energy.

Vodafone has developed a mobile wallet service with Visa Inc, and plans to launch it in the UK next month. This service works with a special SIM card embedded with near field communication technology and can be used to swipe for payments at contactless tills.

Mark Cutifani, chief executive of Anglo American Plc ruled out BHP Billiton Plc's restructuring methods and said he preferred piece-by-piece asset sales in restructuring the mining group.

NYT

* After General Motors emerged from bankruptcy and a government bailout five years ago, the board of directors of the "new G.M." was expected to keep a more watchful eye on a company that had gone seriously off track. But on the issue of vehicle safety, the board until recently took a mostly hands-off approach, rarely even discussing the topic beyond periodic reviews of product quality with company executives, according to interviews with current and former board members. (http://nyti.ms/Ww1XX2)

* Just as the iPod's appeal relied in part on Apple Inc's music industry relationships, the future of its new wrist device may rest on courting health companies. (http://nyti.ms/1rSRbc8)

* Hourly workers often face unpredictable schedules and fluctuating hours each week, but at a Macy's Inc in Manhattan, a union has made a difference. (http://nyti.ms/1tDHj62)

* Alibaba <IPO-BABA.N>, started by Jack Ma in 1999, is about to sell shares in the United States that could value the company at about $160 billion. (http://nyti.ms/1uFwDAI)

* Public health experts say hundreds of children under 16 continue to work in America's tobacco fields, where they are exposed to harmful chemicals like nicotine. (http://nyti.ms/1CHlKUI)

* Stronger computing power, improved satellite and radar technology and more sophisticated scientific models give airlines a greater understanding of flying conditions. This means they can better plan their operations before flights - for instance by canceling flights early and avoiding stranding passengers at airports.(http://nyti.ms/1rSPafV)

Canada

THE GLOBE AND MAIL

** Lawyers for 182 former General Motors Co car dealers across Canada will face off with General Motors of Canada Ltd in a Toronto courtroom this week, as a trial begins in a C$750 million ($687 million) class action alleging the car maker unfairly pressured the dealers to give up their businesses as it sought a government bailout during the financial crisis. (http://bit.ly/1lQyG5N)

** Toronto Mayor Rob Ford's office asked city staff to look into using one of their most coercive powers - the expropriation of privately owned land - to help a client of the mayor's family business add more parking spaces. Mayor Ford's relationship with Apollo Health and Beauty Care, a soap manufacturer that contracts the Ford family's printing company to make labels for its products, is the focus of an ongoing investigation by Toronto's integrity commissioner. (http://bit.ly/1uFSx6T)

** Canada is experiencing a serious shortage of an essential drug for the treatment of bladder cancer. The shortfall, which is due to manufacturing problems at plants operated by two different pharmaceutical companies, could have major consequences for patients. (http://bit.ly/1xx3dKF)

NATIONAL POST

** With use of drones for commercial uses illegal in the United States, startups are popping up in Canada that offer services from monitoring crops to selling real estate. (http://bit.ly/1CIgKzf)

** Quebec Premier Philippe Couillard is now downplaying his desire to have Quebec sign the Canadian Constitution. A day after suggesting he'd like the province to do so by 2017 for the 150th anniversary of Confederation, Couillard told reporters on Sunday that his top priority is the economy. (http://bit.ly/1lMDoRx)

** As potential jurors enter a Montreal courtroom on Monday for jury selection in the first-degree murder trial of Luka Magnotta, few will encounter a complete stranger in the defendant. Accused in the brutal murder of Chinese university student Lin Jun, Magnotta, 32, who changed his name from Eric Clinton Kirk Newman, is already infamous. (http://bit.ly/1qGSVS0)

Hong Kong

SOUTH CHINA MORNING POST

* Zhang Yaqin, the man who helped build Microsoft's biggest technology research operation outside of the United States, is leaving the software giant to join Chinese online search powerhouse Baidu. Sources close to Baidu said Zhang would report directly to Robin Li Yanhong, the co-founder of Baidu. (http://bit.ly/1w5CkMd)

* The gutter oil scare deepened in Hong Kong and Macau after it emerged that another importer in the city and 21 businesses in the former Portuguese enclave had purchased oil from the Taiwanese supplier at the centre of the scandal. The Hong Kong importers include Dah Chong Hong Holdings Ltd. (http://bit.ly/1wdzF0i)

* Sun Hung Kai Properties Ltd is likely to become Hong Kong's biggest supplier of small flats once its application to convert four luxury residential projects in the northeast New Territories into 4,000 tiny apartments wins approval, according to industry observers. (http://bit.ly/1ogDgVY)

THE STANDARD

* China Auto Rental opens the retail book for its HK$3.62 billion ($467 million) initial public offering in Hong Kong, with 426 million new shares in a range of HK$7.50-HK$8.50 each. Shares of the country's largest auto rental firm, which aims to double the size of its fleet, start to trade on September 19. (http://bit.ly/1uFpdgU)

* A much-hyped idea to link bourses in Hong Kong and Shenzhen is not in the pipeline, China's securities watchdog said, saying one of its current priorities is to hammer out taxation issues for the upcoming Shanghai-Hong Kong Stock Connect program. (http://bit.ly/1tjjuwd)

HONG KONG ECONOMIC JOURNAL

* Chinese shipbuilder China Rongsheng Heavy Industries Group said an independent third party is considering to initiate a potential restructuring involving its unit Jiangsu Rongsheng Heavy Industries Co Ltd. The unit contributed a respective 89 percent and 91.4 percent of China Rongsheng's total revenue for 2013 and for six months ended in June 2014.

HONG KONG ECONOMIC TIMES

* Yuzhou Properties Co Ltd has earmarked 3 billion yuan ($488 million) to replenish landbank in China in the second half of 2014, according to chairman Lam Lungon.

Britain

The Times

PARTIES UNITE IN LAST-DITCH BID TO SAVE THE UNION

David Cameron and Ed Miliband will unite this week to make a last-ditch attempt to save the union by publishing a government paper that commits to handing more powers to Scotland within days of a "no" vote. (thetim.es/1oVKrT7)

ALIBABA TO HELP UK FIRMS FIGHT THE FAKES

British brands fighting the onslaught of Chinese counterfeiters have secured a landmark agreement from Alibaba Group Holding Ltd <IPO-BABA.N> , the internet commerce titan whose imminent listing in New York will vie to be the largest flotation in corporate history. (thetim.es/1pF40Pp)

The Guardian

SCOTTISH INDEPENDENCE: POUND COULD DROP 10 PCT IN VALUE

Scottish independence is expected to knock up to 10 percent off the value of sterling, taking it back to levels last seen when Britain was in recession. Nervous traders have already begun to sell the pound in response to narrowing polls. The currency suffered its worst week in more than a year last week. (bit.ly/1w5olWN)

NORTHERN COMMUTERS FACE BIG RISE IN FARES FOR EVENING TRAVEL

Rail passengers in the north of England are facing large increases in the cost of travel after the introduction of peak evening fares on train services from Monday. (bit.ly/1oVMp5I)

The Telegraph

RYANAIR POISED FOR HUGE BOEING AIRCRAFT ORDER

Ryanair Holdings Plc will on Monday announce a major order for Boeing Co's new 737 MAX jetliner as the colourful low cost airline seeks to boost passenger numbers by almost half to 120 million over the next decade. (bit.ly/1xv0CAR)

MPs WILL GET 10 PERCENT PAY RISE, EXPENSES WATCHDOG SAYS

MPs' pay will rise by 10 percent next year, taking their salaries to 74,000 stg ($120,000), the new head of parliament's expenses watchdog has said, despite warnings from David Cameron that such an increase would be "simply unacceptable". (bit.ly/1rRL0VF)

Sky News

EUROPE AGREES ON FRESH RUSSIAN SANCTIONS

European leaders have agreed to hit Russia with a fresh round of sanctions - despite Moscow signing up to a ceasefire in Ukraine. The sanctions include credit restrictions on Russian companies, export bans, travel bans and asset freezes on a new set of officials. (bit.ly/1lLzJ6u)

EXODUS OF BRITS FROM ECONOMIC WOES IN CYPRUS

British expats are packing up and leaving Cyprus as the effects of the financial meltdown continue to be felt. Removals firms on the island have seen huge demand from people moving back to the UK, with immigration from the east helping replace those on their way out. (bit.ly/1qyo770)

The Independent

CALAIS TO BE OFFERED 9FT-HIGH NATO SUMMIT STEEL SECURITY FENCE TO DETER MIGRANTS

Ministers have approved giving Calais the 9ft-high "Ring of Steel" security fence that had been used at the NATO summit, to help tackle the issue of migrants seeking to illegally board ferries and trucks bound for the UK. (ind.pn/1ofZWWq)

FOUNDER PETER CRUDDAS SIGNALS 1 BLN STG FLOAT AFTER CMC STORMS INTO PROFIT

CMC Markets founder Peter Cruddas today flagged up a 1 billion stg float as he put his spread betting firm back into the black. The former Conservative co-treasurer, who resigned from the party two years ago after a cash-for-access sting, unveiled pre-tax profits of 32.8 million stg in the year to 31 March, turning around a 4 million stg loss in the prior year. (ind.pn/1AeRBYW)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Consumer credit for July at 3:00 pm ET--consensus up $17.3B

ANALYST RESEARCH

Upgrades

Bank of America (BAC) upgraded to Buy from Neutral at Goldman
FireEye (FEYE) upgraded to Buy from Neutral at UBS
Infinera (INFN) upgraded to Buy from Hold at Jefferies
L-3 Communications (LLL) upgraded to Outperform from Perform at Oppenheimer
Matrix Service (MTRX) upgraded to Buy from Hold at KeyBanc
Pinnacle West (PNW) upgraded to Outperform from Market Perform at Wells Fargo
Ternium (TX) upgraded to Overweight from Neutral at JPMorgan

Downgrades

Bonanza Creek (BCEI) downgraded to Outperform from Strong Buy at Raymond James
Fairchild (FCS) downgraded to Neutral from Positive at Susquehanna
Ford (F) downgraded to Underweight from Equal Weight at Morgan Stanley
Keryx (KERX) downgraded to Underperform from Market Perform at FBR Capital
Portland General Electric (POR) downgraded to Market Perform at Wells Fargo

Initiations

AIG (AIG) initiated with a Buy at Citigroup
C1 Financial (BNK) initiated with a Buy at Wunderlich
C1 Financial (BNK) initiated with an Outperform at Keefe Bruyette
Enable Midstream (ENBL) initiated with an Equal Weight at Morgan Stanley
Enservco (ENSV) initiated with an Outperform at Northland
Gulfport Energy (GPOR) initiated with an Equal Weight at Morgan Stanley
Husky Energy (HUSKF) initiated with a Buy at Citigroup
Illumina (ILMN) initiated with an Equal Weight at Morgan Stanley
Otonomy (OTIC) initiated with an Overweight at Piper Jaffray
PerkinElmer (PKI) initiated with an Overweight at Morgan Stanley
Thermo Fisher (TMO) initiated with an Overweight at Morgan Stanley
Waters (WAT) initiated with an Underweight at Morgan Stanley
Westlake Chemical Partners (WLKP) initiated with a Buy at Deutsche Bank
Westlake Chemical Partners (WLKP) initiated with a Neutral at BofA/Merrill
Whiting Petroleum (WLL) initiated with an Equal Weight at Morgan Stanley

COMPANY NEWS

General Electric (GE) to sell appliances business to Electrolux AB (ELUXY) for $3.3B
FMC Corporation (GMC) to acquire Cheminova for $1.8B
Walgreen (WAG) appointed JANA's Barry Rosenstein to board of directors
Fossil (FOSL), Intel (INTC) announced collaboration to develop innovation in wearable tech
TriQuint (TQNT) shareholders approved merger-of-equals with RF Micro Devices (RFMD)
Amazon.com (AMZN) secured $2B credit arrangement

EARNINGS

Companies that missed consensus earnings expectations include:
Piedmont Natural Gas (PNY)

Douglas Emmett (DEI) lowers FY14 FFO view by 5c to $1.53-$1.57, consensus $1.61
Piedmont Natural Gas (PNY) reaffirms FY14 EPS $1.80-$1.90, consensus $1.89

NEWSPAPERS/WEBSITES

GM (GM) to introduce hands free Cadillac model in two years, Bloomberg reports
CenturyLink (CTL) said to seek Rackspace (RAX) acquisition, Bloomberg reports
Ryanair (RYAAY) could place $10B Boeing (BA) order, Reuters says
Sharp (SHCAY) aims to sell U.S. solar-energy development division, Bloomberg reports
T-Mobile (TMUS) files suit against China's Huawei , Re/code says
Discovery (DISCA): Comcast (CMCSA)-TWC (TWC) merger gives unfair advantage, NY Post reports
lululemon (LULU) expected to report sharply lower profit, WSJ reports
United Technologies (UTX) could return 20%, Barron's says
Boeing (BA) shares could climb 20%, Barron's says
Multimedia Games (MGAM) looks inexpensive, Barron's says

SYNDICATE

Ascent Solar (ASTI) files to sell 1M shares for holders
Sequential files to sell 14.33M shares of common stock
Uranium Energy (UEC) files to sell 1.86M shares of common stock

• Showtime for Apple: Big phones, smart watches and high expectations (Reuters)
• Bank of England Gov. Mark Carney Signals Spring Rate Rise (WSJ)
• Quebec Shows Scots Question Returns Even If Answer Is No (BBG)
• Hush money with a 9 year vesting period: Ex-SAC Fund Manager Martoma Sentenced to Nine Years in Prison (BBG)
• Dreams on hold, Brazil's 'new middle class' turns on Rousseff (Reuters)
• Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge (WSJ)
• Egypt court sentences Brotherhood leader, cleric to 20 years in jail (Reuters)
• Princeton Leads U.S. News List as Dartmouth Drops From Top 10 (BBG)
• Iraq's Shi'ite militia, Kurds use U.S. air strikes to further own agendas (Reuters)
• Jimmy Choo Said Near IPO to Value Shoemaker at $1 Billion (BBG)
• Ferguson to reform police, courts after shooting and protests (Reuters)
• U.N. Security Council plans to suppress foreign extremist fighters (Reuters)

Overnight Media Digest

WSJ

* The Federal Reserve plans to hit the biggest U.S. banks with a costly new requirement aimed at reducing the risk that some financial firms remain "too big to fail" nearly six years after the financial crisis erupted. (http://on.wsj.com/Zfj4OJ)

* European governments approved a new round of economic sanctions against Russia, but the measures won't enter into force for several days to see whether negotiations over the fate of war-torn eastern Ukraine show progress. Some nations, led by Finland, wanted to hold back on implementing the new sanctions while talks are under way, after last week's cease-fire between Kiev, Moscow and pro-Russia rebels. (http://on.wsj.com/1lOU8aO)

* The Secretary of the Department of Veterans Affairs broadly outlined his short-term plan for improving the organization and rehabilitating its image, but included few specific details. (http://on.wsj.com/1w8CXog)

* After three years of closely guarding his strategy for Apple Inc, Chief Executive Tim Cook will show his hand Tuesday, with an ambitious blitz of new products and services that aim to resolve questions about the company's ability to innovate. (http://on.wsj.com/1pJSq5Q)

* General Electric Co's deal to sell its appliance business to Electrolux AB is part of a shift driven by Jeff Immelt to focus the conglomerate on finance and industrial equipment. (http://on.wsj.com/YrP1mZ)

* Home Depot Inc confirmed on Monday that its payment systems were breached at its U.S. and Canadian stores in a security breach that may have stretched back to April. (http://on.wsj.com/1qBeftb)

* BGC Partners Inc is expected to make an unsolicited $675 million all-cash offer for rival GFI Group Inc according to people familiar with the matter. The takeover would bolster BGC, the second-largest broker by market capitalization, at a time of soft trading revenues and often-placid markets. (http://on.wsj.com/1lOHybM)

* The Federal Trade Commission on Monday sued AbbVie Inc and other drug companies over allegations they unlawfully sought to delay generic competition for AbbVie's blockbuster testosterone-replacement drug AndroGel. (http://on.wsj.com/YrPIwx)

* General Mills Inc agreed to buy Annie's Inc for $820 million, betting that a bigger presence in the natural-and-organic foods aisles will energize a business sapped by flagging consumption of breakfast cereals and other traditional fare. (http://on.wsj.com/1qBeQLq)

* The chief executive of Hertz Global Holdings Inc stepped down over the weekend amid disappointing results and accounting problems that had drawn outcries from activist investor Carl Icahn and other shareholders. (http://on.wsj.com/1nHlR9a)

* Brazil's state-run oil company Petroleo Brasileiro SA said it has requested access to the testimony of a jailed former Petrobras executive who has made allegations of a massive kickback scheme at the company. (http://on.wsj.com/1tGbZTY)

FT

Google Inc's third version of antitrust deal was rejected again by the European Union on Monday. The failure of this four-year probe deals a heavy blow to the commission's credibility in its highest profile antitrust case since Microsoft Corp.

Amazon.com Inc plans to launch its Fire mobile phone in the UK and Germany this month. The company also cut the price of Fire in the United States to 99 cents from $199.

European Union ambassadors approved new sanctions against Russia on Monday night that are expected to target the country's energy companies.

The United Kingdom's biggest apparel retailer Primark said it plans to open 10 stores in the U.S. by 2016. The company plans to focus from Baltimore to Boston stretch.

Ryanair Holdings Plc said on Monday it will buy at least 100 Boeing Co's next-generation short-haul aircraft for $11 billion. These aircraft have a capacity to seat up to 200 people. (

NYT

* European regulators on Monday pushed Google Inc to give up more in an antitrust settlement - demanding that the company make additional changes to its secret sauce, the search algorithm. (http://nyti.ms/1utAxNW)

* Mathew Martoma, the former portfolio manager for SAC Capital Advisors, was on Monday sentenced to nine years in prison for carrying out one of the biggest insider trading schemes on record. (http://nyti.ms/1lSdoV9)

* Home Depot Inc confirmed on Monday that hackers had broken into its in-store payments systems, in what could be the largest known breach of a retail company's computer network. The retailer said the exact number of customers affected was still not clear. But a person briefed on the investigation said the total number of credit card numbers stolen at Home Depot could top 60 million. (http://nyti.ms/1ugMjfF)

* Alibaba Group Holding Ltd's <IPO-BABA.N> co-founder and executive chairman Jack Ma on Monday spoke to a crowd of more than 800 potential investors as part of a global roadshow for the Chinese e-commerce giant, which is seeking to raise more than $21 billion in its initial public offering, a stock sale that could break size records. (http://nyti.ms/ZfiC31)

* Two of the biggest names in home appliances are joining forces after General Electric Co agreed on Monday to sell its century-old appliance division to Electrolux of Sweden for $3.3 billion in cash. The deal will combine Electrolux's Frigidaire, one of the best-known brands of refrigerators, with G.E.'s stable of products, including its Monogram line of luxury appliances. (http://nyti.ms/1p0WY7Q)

* Twitter Inc announced on Monday that it would begin publicly testing a "buy" button that can be embedded in posts to allow users to buy a product with a couple of clicks. (http://nyti.ms/1oYDbFZ)

* The U.S. Federal Reserve, mindful that some banks are still so big that their failure could weigh on the wider economy, said on Monday that it planned to increase the pressure on large financial firms to shrink. (http://nyti.ms/1pJRiz8)

Canada

THE GLOBE AND MAIL

** Encana Corp has sold the rest of its stake in PrairieSky Royalty Ltd, adding a hefty equity offering to an already hot deal market. Encana will raise C$2.6 billion ($2.37 billion) when the deal closes around Sept. 26, the natural gas company said on Monday. (http://bit.ly/1tGPxdo)

** The Canadian government will defend ordering special forces soldiers to Iraq on both moral and pragmatic grounds, arguing that Canadians are obliged to help stop a savage militant group whose self-proclaimed caliphate risks becoming a training ground for terrorists who could attack Canada and other Western countries. (http://bit.ly/1wardBR)

** A special prosecutor tasked with investigating a controversial campaign to woo ethnic voters to the British Columbia Liberal Party has approved Elections Act charges - though the allegations relate to a 2012 by-election and the full investigation of the ethnic outreach program won't be complete until next year. (http://bit.ly/1on52Aa)

NATIONAL POST

** The Canada Mortgage and Housing Corp is looking at a new formula to push some of its losses on to financial institutions, essentially forcing them to pay a deductible on mortgages insured with the Crown corporation before claims are paid, according to sources. (http://bit.ly/1s67MqN)

** A family of white South Africans - who sought refugee protection in Canada, claiming fear of rape and violence against whites by the black majority in their homeland - have won the Canadian Federal Court's support to continue their asylum claim. (http://bit.ly/1pKBKLp)

China

SHANGHAI SECURITIES NEWS

- The Shenzhen Stock Exchange will start on Tuesday mock trading of stock options that will involve six instruments and 19 brokerages in a pilot scheme.

CHINA SECURITIES JOURNAL

- China's new energy vehicle industry should brace itself for all-round competition by 2020, when government subsidies to electric vehicle makers will be phased out, said Wan Gang, head of China's Ministry of Science and Technology.

SHANGHAI DAILY

- Some Shanghai outlets removed products from Taiwan suspected of containing tainted oil on Sunday, after police on the island broke a recycled cooking oil ring selling used kitchen oil and grease from leather processing plants.

CHINA DAILY

- China's anti-graft watchdog said there were 28 cases of corrupt practices involving holiday gifts over the festive period. In a weekly report posted Monday for Sept. 1 to 7, the commission listed a total of 177 total cases of rules violations.

Britain

The Times

FLIGHTS FACE CHAOS AS RUSSIA RETALIATES AGAINST SANCTIONS

Russia threatened to close its airspace to European passenger airlines yesterday in response to tougher sanctions intended to punish it for its recent actions in Ukraine. (thetim.es/1rwNG4R)

EU REJECTS GOOGLE'S LATEST OFFER IN COMPETITION ROW

Google Inc's latest attempt to settle a European investigation into alleged anti-competitive behaviour has failed, reopening the possibility that the Internet search company could face huge fines. The company has been ordered to make more concessions in order to reach a deal with regulators. (thetim.es/1pJ64pJ)

The Guardian

DUCHESS OF CAMBRIDGE AND PRINCE WILLIAM EXPECTING SECOND CHILD

Prince William and the Duchess of Cambridge are expecting their second child, the royal family said on Monday. The announcement was made from Clarence House on Twitter. (bit.ly/WxvyiH)

PRIMARK TO LAUNCH 200 MLN STG BID TO CRACK U.S. CLOTHING MARKET

Fashion retailer Primark is to plough 200 million stg ($321.82 million) into a bid to crack the notoriously difficult U.S. market as it looks to succeed where some of Britain's biggest high street names including Tesco, Marks & Spencer and Sainsbury's have failed. (bit.ly/Zf6O0w)

The Telegraph

SCOTTISH INDEPENDENCE: THE QUEEN IS URGED TO INTERVENE

David Cameron is under growing pressure to ask the queen to speak out in support of the union as another opinion poll confirms a surge in support for Scottish independence. Senior MPs have suggested an intervention from Her Majesty could "make all the difference" as a TNS poll shows the Yes and No campaigns running neck and neck. (bit.ly/Zf77sr)

BRITAIN FACES STORM AS GIANT GLOBAL INVESTORS AWAKEN TO BREAK-UP DANGERS

Japan's biggest bank, Nomura Holdings Inc, has advised clients to slash financial exposure to the United Kingdom and brace for a possible collapse of the pound after polls showed the independence campaign running neck and neck, warning that the separation of England and Scotland after more than 300 years would be a "cataclysmic shock." (bit.ly/1qB2naG)

Sky News

EX-RBS EXEC TO RUN MORTGAGE GROUP KENSINGTON

A former head of one of Britain's emerging "challenger banks" is to take the helm of Kensington, the sub-prime mortgage lender, when it finalises a takeover by two Wall Street buyout firms. Ian Henderson, the former chief executive officer of Shawbrook, is to be installed in the same role at Kensington following its takeover by divisions of Blackstone and TPG. (bit.ly/1ufGhM1)

PM INVOKES WW2 IN SCOTTISH 'NO' PLEA

Prime Minister David Cameron said at a Downing Street reception for some of Britain's top executives that the United Kingdom won World War II through a united front and it was crucial that the country remained undivided. (bit.ly/1okFhka)

The Independent

AMAZON FIRE PHONE LAUNCHES IN THE UK: WOULD-BE IPHONE COMPETITOR BEATS APPLE TO THE PUNCH

Retailer Amazon.com Inc has launched its first ever smartphone in the United Kingdom, more than a month after the device was released in the United States. The Fire Phone will be available for free on a monthly 33 stg contract from O2 and will save customers 79 stg on the cost for a year of Amazon Prime. (ind.pn/1werdxU)

LUTON AIRPORT TO REOPEN AFTER 'SUSPICIOUS ITEM' FOUND IN SECURITY AREA DESTROYED BY POLICE IN CONTROLLED EXPLOSION

London Luton's airport is to reopen after passengers were evacuated from the premises and all incoming flights suspended when a suspicious item was found in the security search area. (ind.pn/1CL2zt7)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
NFIB small business optimism for August at 7:30--consensus 96.0
JOLTs job openings for July at 10:00--consensus 4.7M

ANALYST RESEARCH

Upgrades

ArcelorMittal (MT) upgraded to Outperform from Neutral at Credit Suisse
Barclays (BCS) upgraded to Overweight from Neutral at HSBC
CF Industries (CF) upgraded to Outperform from Sector Perform at RBC Capital
Columbia Property Trust (CXP) upgraded to Outperform at JMP Securities
D.R. Horton (DHI) upgraded to Overweight from Neutral at JPMorgan
Finish Line (FINL) upgraded to Buy from Hold at Deutsche Bank
Global Cash Access (GCA) upgraded to Buy from Hold at Stifel
Lennar (LEN) upgraded to Overweight from Neutral at JPMorgan
Lloyds Banking (LYG) upgraded to Overweight from Neutral at HSBC
Medivation (MDVN) upgraded to Outperform from Market Perform at Bernstein
Newmont Mining (NEM) upgraded to Outperform from Market Perform at Cowen
PulteGroup (PHM) upgraded to Neutral from Underweight at JPMorgan
Ralph Lauren (RL) upgraded to Strong Buy from Buy at ISI Group
Total (TOT) upgraded to Neutral from Underperform at BofA/Merrill
Virtusa (VRTU) upgraded to Overweight from Neutral at JPMorgan

Downgrades

Bank of Ireland (IRE) downgraded to Neutral from Buy at UBS
Dick's Sporting (DKS) downgraded to Market Perform from Outperform at Wells Fargo
M.D.C. Holdings (MDC) downgraded to Underweight from Neutral at JPMorgan
M/I Homes (MHO) downgraded to Neutral from Overweight at JPMorgan
MarkWest Energy (MWE) downgraded to Hold from Buy at Stifel
Meritage Homes (MTH) downgraded to Neutral from Overweight at JPMorgan
Mosaic (MOS) downgraded to Sector Perform from Outperform at RBC Capital
Pacific Coast Oil (ROYT) downgraded to Hold from Buy at Stifel
Parkway Properties (PKY) downgraded to Market Perform at JMP Securities
Standard Pacific (SPF) downgraded to Underweight from Neutral at JPMorgan

Initiations

AMC Entertainment (AMC) initiated with a Hold at Topeka
AMRI (AMRI) initiated with an Overweight at JPMorgan
American Airlines (AAL) initiated with an Outperform at Credit Suisse
Auris Medical (EARS) initiated with a Buy at Needham
CTI BioPharma (CTIC) initiated with an Overweight at Piper Jaffray
Catalent (CTLT) initiated with a Buy at BofA/Merrill
Catalent (CTLT) initiated with a Buy at Jefferies
Catalent (CTLT) initiated with a Hold at Deutsche Bank
Catalent (CTLT) initiated with an Overweight at JPMorgan
Catalent (CTLT) initiated with an Overweight at Piper Jaffray
Central Valley Community (CVCY) initiated with a Market Perform at Keefe Bruyette
Chimerix (CMRX) initiated with a Buy at Cantor
Delta Air Lines (DAL) initiated with an Outperform at Credit Suisse
Endocyte (ECYT) initiated with a Buy at Cantor
EnerNOC (ENOC) initiated with an Outperform at Pacific Crest
Good Times Restaurants (GTIM) initiated with a Buy at Roth Capital
JetBlue (JBLU) initiated with an Underperform at Credit Suisse
MEI Pharma (MEIP) initiated with a Buy at Cantor
Mavenir Systems (MVNR) initiated with an Outperform at Pacific Crest
Merrimack (MACK) initiated with a Buy at Cantor
Orion Engineered (OEC) initiated with an Equal Weight at Barclays
Southwest (LUV) initiated with a Neutral at Credit Suisse
Synchrony Financial (SYF) initiated with a Buy at Goldman
Synchrony Financial (SYF) initiated with a Hold at Deutsche Bank
Synchrony Financial (SYF) initiated with an Equal Weight at Barclays
Synchrony Financial (SYF) initiated with an Outperform at Keefe Bruyette
Synchrony Financial (SYF) initiated with an Overweight at JPMorgan
Synchrony Financial (SYF) initiated with an Overweight at Morgan Stanley
Tetraphase (TTPH) initiated with a Buy at Cantor
Threshold Pharmaceuticals (THLD) initiated with a Buy at Cantor
U.S. Geothermal (HTM) initiated with a Buy at Maxim
United Continental (UAL) initiated with an Outperform at Credit Suisse

COMPANY NEWS

Home Depot confirmed that its payment data systems were breached, which could potentially impact customers using payment cards at its U.S. and Canadian stores. While the company continues to determine the full scope, scale and impact of the breach, there is no evidence that debit PIN numbers were compromised
General Mills (GIS) will buy Annie's (BNNY) for $46 per share in cash. The deal has an aggregate value of approximately $820M
iPass (IPAS) said that it is exploring strategic alternatives
Baker Hughes (BHI) named current Avon Products (AVP) CFO Kimberly Ross as CFO; Avon named Robert Loughran as acting CFO
Level 3 (LVLT), tw telecom (TWTC) received U.S. DOJ approval of merger

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
HD Supply (HDS), CM Finance (CMFN), Korn/Ferry (KFY), CHC Group (HELI), Casey's General Stores (CASY), NCI Building Systems (NCS)

Companies that missed consensus earnings expectations include:
Leidos (LDOS), Triangle Petroleum (TPLM), Pep Boys (PBY)

Companies that matched consensus earnings expectations include:
FuelCell (FCEL)

NEWSPAPERS/WEBSITES

Fed to require large US banks to have extra financial padding, WSJ reports
Apple (AAPL) looking to refocus on 9.7-inch iPad in 2H14, DigiTimes Research says
Boeing (BA) up against pressure to boost 737 production rate, Reuters reports
General Electric (GE) to focus on finance, industrial equipment, WSJ reports
Six Flags (SIX) wooden roller coaster catches fire, portion collapses, LA Times reports
Comverse (CNSI) to fire hundreds worldwide in next few days, Globes reports
Yahoo (YHOO) exploring ways to minimize taxes on sale of Alibaba (BABA) shares, Barron's says

SYNDICATE

Brookdale Senior Living (BKD) files to sell 8.75M shares
Physicians Realty Trust (DOC) offers 9M common shares
Pinnacle Foods (PF) files to sell 15M shares for holders
TriNet (TNET) files to sell 10.5M shares for General Atlantic LLC

First, Europe infamously shifted to a NIRP and now Japan has begun NIRP monetization. As WSJ reports, Tuesday marked another milestone in the topsy-turvy world of monetary easing in Japan: The Bank of Japan bought short-term Japanese government debt at a negative yield for the first time. In the understatement of the decade, one Japanese bank strategist noted, "The BOJ probably didn't expect this would happen, and T-bill rates staying negative should be a cause of concern for them." The BoJ's decision to scoop up these negative-yielding bills appears to confirm they will meet the QQE-buying demands no matter what the cost (to the Japanese people). The bottom line, the Bank of Japan is now implicitly issuing debt to the Japanese Treasury.

As WSJ reports,

The BOJ scooped up some of the three-month No. 477 Treasury bill, which has traded at a negative yield for the past two trading days amid strong demand, the market participants said.

 

...

 

Traders said the bank wanted to show the market that it would meet its asset purchase goals–literally at whatever the cost.

 

...

 

Market participants say the bank probably didn’t foresee buying Japanese debt at negative yields. But the European Central Bank’s easing has created demand for short-term Japanese debt from European investors, to the extent that interest rates have turned negative.

 

“The BOJ probably didn’t expect this would happen, and T-bill rates staying negative should be a cause of concern for them,” said Shogo Fujita, chief Japan bond strategist at Merrill Lynch Japan Securities Co.

*  *  *
So, in summary, normally, people who buy debt expect to get their money back plus some interest. Negative yield means the buyer gets back less than he or she puts in.

In other words, the Bank of Japan is now ISSUING debt TO the Japanese Treasury.

• British PM begs Scots: Don't rip apart our UK 'family of nations' (Reuters)
• Obama has become Bush: Obama’s Task: Rally U.S. Public, Allies in Terror Fight (BBG)
• Alibaba's record IPO covered after first few roadshow meetings (Reuters)
• Ferrari chairman Luca Di Montezemolo to quit after 23 years (BBC)
• Combat Reversals Pressure Assad (WSJ)
• Top LBO Fund Investors Pile on Leverage to Boost Returns (BBG)
• BOJ's Iwata upbeat on economy, unfazed by post-tax hike slump (Reuters)
• Carney Can’t Escape Housing as Debt Colors BOE Policy (BBG)
• Detroit Clears Crucial Hurdle on Bankruptcy (NYT)
• Kerry in Iraq to back government, build support against Islamic State (Reuters)
• Ahead of speech, Obama briefs Congress on Islamic State strategy (Reuters)
• Microsoft Near Deal to Buy Minecraft Maker Mojang (WSJ)
• Intel's CEO says its costly tablet chip strategy has paid off (Reuters)
• Lower Manhattan Revival Nears Culmination After 13 Years (BBG)
• The Curious Case of an 'Oxford' Man (WSJ)
• Dollar General Launches Tender Offer for Family Dollar Shares (WSJ)

Overnight Media Digest

WSJ

* Syrian President Bashar al-Assad, who four months ago seemed on the verge of defeating rebel forces, is now mired in defensive battles on several fronts, complicating efforts to fight the Islamic State militant group. (http://on.wsj.com/1wfBolG)

* Apple Inc was not the first company to make a smartphone or a tablet computer. But its iPhone and iPad redefined those products. Now, Apple is betting that it again can succeed where others have struggled. Apple Chief Executive Tim Cook Tuesday introduced a new payments system for mobile devices, a series of smartwatches and a pair of larger iPhones. The new digital-payments service, Apple Pay, will let users buy merchandise simply by waving a newer iPhone or Apple Watch in front of a reader. Apple said it hopes to speed up the checkout process and, ultimately, to replace physical wallets. (http://on.wsj.com/1tJguxj)

* Microsoft Corp is in serious discussions to buy Mojang AB, the Swedish company behind the popular "Minecraft" video game, according to a person with knowledge of the matter. (http://on.wsj.com/1qDItMf)

* Dollar General Corp plans to take its $9 billion offer to buy Family Dollar Inc directly to its rival's shareholders Wednesday, in an attempt to pull off a hostile takeover after its offer was rejected by its target's board. (http://on.wsj.com/1p53V7O)

* A nationwide showdown between activists and universities over investments in coal, oil and gas intensified Tuesday after a University of California task force abruptly pulled back a draft recommendation not to sell its fossil-fuel holdings. (http://on.wsj.com/1BqVLPK)

* New developments in negotiations over taxes could signal improving prospects for legislation to restrict inversion deals, as lawmakers seek bipartisan solutions to address growing problems in the U.S. tax system. (http://on.wsj.com/YvjujS)

* Target Corp's new Chief Executive Brian Cornell plans to double down on just a handful of departments like baby products and fashion, a strategic shift as the discounter works to bring shoppers back to its stores and better compete with online rivals. (http://on.wsj.com/1qKno1m)

* U.S. commodity regulators took long-awaited steps to make it easier for hedge funds and other firms to raise cash by publicly advertising stakes in their funds. The Commodity Futures Trading Commission late Tuesday eased long-standing marketing restrictions on so-called private offerings by hedge funds and other funds sold only to wealthy investors, a move aimed at aligning the CFTC's restrictions with similar rules set by the Securities and Exchange Commission. (http://on.wsj.com/1xGn4qI)

* Nissan Motor Co Ltd said on Wednesday that it had named Roland Krüger, a BMW executive, as head of its Infiniti luxury car division, moving swiftly to fill one of the positions left vacant by the pending departure of Andy Palmer, a top Nissan manager. (http://on.wsj.com/1wfzP7r)

* Citigroup Inc Chief Executive Michael Corbat, flanked by Mexican President Enrique Pena Nieto and top Banamex executives, said Citigroup would spend $1.5 billion over four years to improve technology systems and back-office support, while also expanding loans in Mexico, the bank's second-largest market outside the United States. (http://on.wsj.com/1p4cW11)

* Trump Entertainment Resorts Inc, which owns two Atlantic City casinos bearing Donald Trump's name, filed for Chapter 11 bankruptcy protection. The Trump Plaza already was slated to close next week, and executives for the Trump Taj Mahal warned the property could close in November unless it receives concessions from its workers. (http://on.wsj.com/1wflCHq)

* Comcast Corp reached an agreement to carry Univision Communications Inc's sports channel, the companies said Tuesday, removing a source of friction that had fueled complaints from Univision about Comcast's proposed acquisition of Time Warner Cable Inc. (http://on.wsj.com/1qDOzwh)

FT

Carmaker Renault SA and French billionaire Vincent Bollore, which will work as a team to make electric cars, said they will carry out a feasibility study for Renault to make electric cars using Ballore's batteries.

Bank of England governor Mark Carney said on Tuesday that all main parties in Westminster ruled out currency union between an independent Scotland and the rest of the UK.

America Movil SAB and Oi SA said they are in talks to bid for telecom group Telecom Italia SpA.

Politico has signed a joint venture with German publisher Axel Springer SE to expand its brand of political coverage to Europe, the company said.

UK coffee chain Costa Coffee aims to expand its presence in France with 10 stores by the end of February in addition to the eight outlets already opened in Paris.

NYT

* The fiercest opponent to Detroit's blueprint for erasing its debts and investing in city services has reached an "agreement in principle" with city officials, court documents filed Tuesday evening showed. The tentative settlement with Syncora Guarantee, a bond insurer that said its exposure in Detroit amounted to hundreds of millions of dollars, came suddenly, a week into a trial aimed at allowing Detroit, the largest American city ever to file for bankruptcy, to remake its finances and start over. (http://nyti.ms/1AwQ2pk)

* Microsoft Corp is in advanced talks to acquire the maker of the game Minecraft for more than $2 billion, people briefed on the discussions said on Tuesday. The move was intended to ensure that one of the most popular games was available for the computing giant's family of devices. (http://nyti.ms/1xFUMg4)

* Apple Inc on Tuesday introduced a highly anticipated smartwatch, which combines health and fitness monitoring with mobile computer capabilities like maps. The company also introduced two iPhones with larger screens. (http://nyti.ms/1nJDAwI)

* The chairman of the Federal Communications Commission warned the wireless phone industry on Tuesday that the commission was seriously considering subjecting mobile carriers to the same net neutrality regulations as providers of wired Internet service. (http://nyti.ms/1lUHmIn)

* As Google Inc seeks expert advice on how to carry out its "right to be forgotten" court order in Europe, the company went to Spain on Tuesday, where it began a seven-city European tour of public meetings, hearing views from privacy-rights proponents, freedom-of-information advocates and members of the public about the best ways to remove search-engine links to information that petitioners contend is intrusive and no longer relevant. (http://nyti.ms/WQAq31)

Canada

THE GLOBE AND MAIL

** Senior executives of Southwest Airlines Co are sending strong signals that they're preparing to enter the Canadian market, although cities in Canada are among 50 new destinations the airline is still considering. (http://bit.ly/1pOsNkh)

** A Parks Canada-led team has found a ship lost in the doomed Franklin expedition to unlock the Arctic nearly 170 years ago, the fruit of a search championed by Prime Minister Stephen Harper in his efforts to forge a Conservative brand of Canadian nationalism. The Prime Minister, who has styled his government a defender of Ottawa's claim to the Arctic, described the expedition as having laid the foundation for Canadian sovereignty in the region. (http://bit.ly/1wenCCD)

** The Health Canada-funded Canadian Centre on Substance Abuse is calling for a broad review of marijuana policy, including a closer look at the impact of legalization south of the border in Colorado and Washington. (http://bit.ly/1CQVxDc)

NATIONAL POST

** Cenovus Energy Inc and Canadian Natural Resources Ltd are considering divesting from their free land assets after the overwhelming success of Encana Corp's spin-off unit, the companies said on Tuesday. On Monday, Encana sold its remaining 70.2 million shares of PrairieSky Royalty Ltd for C$2.6-billion, only months after offloading 54 percent of the unit in a C$1.67-billion initial public offering. (http://bit.ly/WHS20B)

** Trailing far behind the pack, Sarah Thomson dropped out of Toronto mayor's race on Tuesday and called on the city and other candidates to coalesce around one person to oust Mayor Rob Ford. She said she will endorse whoever has the best chance of beating the mayor in the days leading up to the Oct. 27 vote. (http://bit.ly/1uvFYvO)

** Battling Islamic extremism represents the "greatest struggle of our generation," Foreign Affairs Minister John Baird told a joint House of Commons committee on Tuesday as the government revealed some Canadian troops are already inside Iraq. (http://bit.ly/1uvFhCR)

China

CHINA SECURITIES JOURNAL

- Xiang Junbo, chairman of the China Insurance Regulatory Commission, said the commission will make efforts to cut taxes in the insurance sector, which will help free up some 8 trillion yuan ($1.30 trillion) that can be used for urbanisation.

SHANGHAI SECURITIES NEWS

- Carbon fibre, rare earth and high-temperature resistant metallic materials may soon be included in the list of resources supported by the government, according to a source close to the Ministry of Industry and Information Technology. The government is considering a comprehensive framework, including subsidies, risk management and an improved tax system to support the development of the sector.

SECURITIES TIMES

- The China Banking Regulatory Commission Chairman Shang Fulin said the commission will set up a new method to evaluate the liability and management of commercial banks.

SHANGHAI DAILY

- Subdued buying sentiment continued to cloud Shanghai's housing market in the first week of September despite the arrival of the traditional high season for property sales. The purchases of new homes, excluding government-subsidised housing, dropped 35.4 percent from a week earlier to 136,600 square metres, Shanghai Uwin Real Estate Information Services said in a report.

- Premier Li Keqiang said that recent anti-trust probes had not targeted specific firms or industries, and that foreign companies accounted for just 10 percent of those involved. By increasing monitoring, China has tried to cultivate a fair and competitive business climate, he told a group of business leaders ahead of the Summer Davos forum.

CHINA DAILY

- China plans to establish a security fund for its trust industry, which has about $2 trillion under management, as repayment risks accumulate. The fund, to be established by the China Trustee Association and its members, will monitor industry risks and participate in the disposal of assets and restructuring of trust companies that are closed or suspended, the newspaper said, citing people it didn't identify.

Hong Kong

SOUTH CHINA MORNING POST

* Huawei Technologies Co Ltd, China's largest maker of telecommunications equipment, has investigated 116 employees and sent four of them to court over allegations of graft in its consumer and corporate units, according to reports from mainland media Caixin and China Business News. (http://bit.ly/Yv0LVG)

* The Centre for Food Safety is investigating the role of two Hong Kong firms in supplying the Taiwanese company at the centre of the "gutter oil" scandal. (http://bit.ly/1oq8kmp)

* Automobili Lamborghini is experiencing strong demand for its new supercar across the mainland and expects sales to pick up this year despite the crackdown on lavish spending. President Stephan Winkelmann said the Italian luxury carmaker had already received 300 orders for the entry-level Huracan LP 610-4 from the mainland, Hong Kong and Taiwan. (http://bit.ly/1tISDOh)

THE STANDARD

* The grey market price of the iPhone 6 reached a record high of 28,000 yuan ($4,563) in Beijing, just ahead of the smartphone's global introduction. The first ever iWatch and a mobile payments system were also said to be part of the new offering from Apple Inc CEO Tim Cook. (http://bit.ly/WPGJ6V)

* Illicit cigarettes make up nearly 34 percent of consumption locally, placing Hong Kong third in the list of cigarette-smuggling places in Asia, according to a study. The study "Asia-14: 2013 Illicit Tobacco Indicator" notes that illicit cigarettes worth HK$222 million ($28.6 million) was seized last year by the Customs and Excise Department, up 15.6 percent over 2012. (http://bit.ly/1rVxn7Y)

* Hong Kong's services sector will face the strongest demand for staff in the last three months this year since the fourth quarter of 2011, a survey by ManpowerGroup has found. (http://bit.ly/1uv9NwI)

HONG KONG ECONOMIC JOURNAL

* China train maker CSR Corp Ltd , which had secured $2.96 billion worth of new contract so far in the first half of 2014, has raised its full-year sales target to up to $5 billion from $3 billion, according to Chairman Zheng Changhong

* Lianhua Supermarket Holdings Co Ltd said it plans to buy Yiwu City Life Supermarket Co Ltd, in a deal to be settled by issue of new shares. The company expects leasing of the retail spaces operated by Yiwu will bring in stable monthly income.

Britain

The Times

FAIRFIELD CONSIDERS OPTIONS FOR A FRESH SHOT AT LONDON

Fairfield, owned by a consortium of private investors led by Warburg Pincus, is being advised by Rothschild on alternative routes to the public market. Perhaps via another shot at a London flotation or, more likely, a reverse takeover of any one of a number of quoted oil producers with UK assets and a yawning disparity between their values and market capitalisations. (thetim.es/ZgbvHI)

BSKYB BID MAY STILL BE ON CARDS, SAYS 21ST CENTURY FOX PRESIDENT

Chase Carey, the president of Twenty-First Century Fox Inc , has hinted that a renewed bid to take full control of BSkyB remains on the cards, but said there are no plans to make a major acquisition in the near future. (bit.ly/1ttJ9mb)

The Guardian

UK SENDS MACHINE GUNS TO HELP IRAQI FORCES FIGHT ISLAMIC STATE

The UK is sending a consignment of heavy machine guns and ammunition to Iraq's government to assist with its battle against militants from Islamic State (ISIS). (bit.ly/1AvQqnO)

MARK CARNEY WARNS TUC THAT PAY RISES MAY COME AFTER MORTGAGE HIKE

Bank of England governor Mark Carney has warned trade union members they face paying higher mortgage rates before many of them receive rises in real wages. (bit.ly/1ttzhZw)

The Telegraph

SCOTTISH SPLIT WOULD HIT UK GROWTH, WARNS TOP INVESTMENT GROUP

Britain's economic growth will be almost 1 percentage point lower next year if Scotland votes for independence, a leading investment group, Axa Investment Managers, said. (bit.ly/1AweHKH)

KEEP THE QUEEN OUT OF THE SCOTTISH REFERENDUM CAMPAIGN, BUCKINGHAM PALACE SAYS

The Palace intervened to protect the Queen's neutrality after Alex Salmond, the Scottish First Minister, risked controversy by suggesting that the Queen would be proud to reign over an independent Scotland. (bit.ly/Zg7L8X)

Sky News

B&Q BOSS WARNS OVER PRICES IF SCOTS VOTE YES

The boss of Britain's biggest DIY retail group, B&Q, has warned that Scottish consumers could face higher prices than their counterparts south of the border if voters back independence in next week's referendum. (bit.ly/YsU4Ue)

SAN MIGUEL WADDLES INTO £2BN PENGUIN BID WAR

The Filipino conglomerate San Miguel Corp is poised to wade into the 2 billion stg ($3.23 billion) auction of United Biscuits UK Ltd <IPO-UNI.L>, owner of some of Britain's biggest food brands. (bit.ly/YuTRje)

The Independent

WONGA HIRES LATVIAN SPECIALIST TO RUN SCANDAL-HIT UK BUSINESS

Controversial payday loans company Wonga hired Tara Kneafsey, a former management consultant who has been with RSA Insurance Group PLC for eight years, as its UK consumer loans managing director. (ind.pn/1ttyE20)

SCOTTISH INDEPENDENCE: BRITAIN FACES CONSTITUTIONAL CRISIS AT NEXT ELECTION

Ministers are under pressure to explain how they would respond if Scots vote for independence, as it emerged that Labour is on course to win the general election only because of its strong support in Scotland. The latest "poll of polls" for The Independent suggests that Ed Miliband will win an overall majority of 32 next May. (ind.pn/1qK4c3Q)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Wholesale trade inventories for July at 10:00--consensus up 0.5%
Wholesale trade sales for July at 10:00--consensus up 0.6%

ANALYST RESEARCH

Upgrades

ArcelorMittal (MT) upgraded to Overweight from Underweight at Barclays
CRH Plc. (CRH) upgraded to Outperform from Underperform at Raymond James
Coach (COH) upgraded to Overweight from Neutral at Atlantic Equities
Hartford Financial (HIG) upgraded to Outperform from Market Perform at FBR Capital
Imperva (IMPV) upgraded to Outperform from Perform at Oppenheimer
L Brands (LB) upgraded to Outperform from Neutral at Credit Suisse
Marcus (MCS) upgraded to Buy from Neutral at B. Riley
Noodles & Company (ndls) upgraded to Buy from Neutral at UBS
Sunoco Logistics (SXL) upgraded to Overweight from Equal Weight at Barclays
Twitter (TWTR) upgraded to Buy from Neutral at UBS

Downgrades

Apple (AAPL) downgraded to Sector Perform from Outperform at Pacific Crest
Boyd Gaming (BYD) downgraded to Equal Weight from Overweight at Morgan Stanley
Diodes (DIOD) downgraded to Neutral from Outperform at RW Baird
eBay (EBAY) downgraded to Neutral from Overweight at Piper Jaffray
Fairchild (FCS) downgraded to Neutral from Outperform at RW Baird
GT Advanced (GTAT) downgraded to Neutral from Buy at Goldman
GT Advanced (GTAT) downgraded to Neutral from Overweight at Piper Jaffray
Mobileye (MBLY) downgraded to Hold from Buy at Deutsche Bank
ON Semiconductor (ONNN) downgraded to Neutral from Outperform at RW Baird
STMicroelectronics (STM) downgraded to Neutral from Outperform at RW Baird
Spirit Airlines (SAVE) downgraded to Market Perform from Outperform at Cowen
Tiffany (TIF) downgraded to Neutral from Outperform at Credit Suisse
Vital Therapies (VTL) downgraded to Neutral from Outperform at Credit Suisse
Washington Federal (WAFD) downgraded to Neutral from Buy at Sterne Agee

Initiations

American Residential Properties (ARPI) initiated with a Buy at Sterne Agee
C.H. Robinson (CHRW) initiated with an Equal Weight at Barclays
Cablevision (CVC) initiated with a Hold at Canaccord
Charter Communications (CCMM) initiated with a Buy at Canaccord
CyrusOne (CONE) initiated with a Hold at Stifel
DISH (DISH) initiated with a Hold at Canaccord
Digital Realty (DLR) resumed with a Hold at Stifel
DirecTV (DTV) initiated with a Hold at Canaccord
Equinix (EQIX) resumed with a Buy at Stifel
Expeditors (EXPD) initiated with an Underweight at Barclays
Farmland Partners (FPI) initiated with a Buy at Stifel
Hub Group (HUBG) initiated with an Equal Weight at Barclays
Netflix (NFLX) initiated with a Buy at Canaccord
Netflix (NFLX) initiated with a Neutral at SunTrust
Starwood Waypoint (SWAY) initiated with a Buy at Sterne Agee
Time Warner Cable (TWC) initiated with a Buy at Canaccord
VMware (VMW) initiated with a Buy at Maxim
XPO Logistics (XPO) initiated with an Overweight at Barclays

COMPANY NEWS

Apple (AAPL) announced iPhone 6, 6 Plus, Apple Watch, Apple Pay
Dollar General (DG) commenced tender offer to acquire Family Dollar (FDO) for $80/share (DLTR)
Pershing Square Capital Management sent a letter to the board of Allergan (AGN) that highlights several reasons why Allergan is extremely shareholder unfriendly and why now is the time for Allergan's management team to "wake up" (VRX)
AngloGold (AU) to restructure international mining under new company
Urban Outfitters (URBN) said Q3 SSS thus far are low single-digit negative 
Carson Block shorted 500.com (WBAI), ValueWalk reported
Sirius XM (SIRI) forecast net self-pay subscriber additions of approximately 1.25M in FY14

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Sparton (SPA), SAIC (SAIC), HealthEquity (HQY), Limoneira (LMNR), Oxford Industries (OXM), pSivida (PSDV)

Companies that missed consensus earnings expectations include:
PMFG, Inc. (PMFG), Evolution Petroleum (epm), Miller Energy (MILL), Unilife (UNIS), Krispy Kreme (KKD), Streamline Health (STRM), Peregrine (PPHM)

Companies that matched consensus earnings expectations include:
Palo Alto (PANW)

NEWSPAPERS/WEBSITES

Microsoft (MSFT) in serious talks to acquire Mojang AB for more than $2B, WSJ reports
Target (TGT) CEO to narrow focus to re-energize 'signature' categories, WSJ reports
Apple (AAPL) could acquire Path social network, Pando Daily reports
Barclays (BCS) hires BofA Merrill Lynch's (BAC) Richard Casavechia, FT reports
States investigate Home Depot (HD) breach, senators call for FTC probe, Reuters reports
FDA panel votes against Actavis (ACT) blood pressure pill, Bloomberg reports

SYNDICATE

Armada Hoffler (AHH) files to sell 5M shares of common stock
AvalonBay (AVB) to sell 4.5M shares in a forward sales agreement with Goldman
Callon Petroleum (CPE) 12.5M share Secondary priced at $9.00
DHT Holdings (DHT) proposes registered direct offering of common stock
Equity One (EQY) files to sell 3.825M shares of common stock