• 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

• 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

By Nick Colas of ConvergEx

(Brick) House Money Investing
 
Every gambler knows about the “House money effect” – betting more when you are up, since part of your pile of chips comes from winnings rather than initial capital.  Recent global stock market volatility means we are essentially in the middle of a huge behavioral finance experiment: how will investors consider their substantial gains over the past 5 years?  “House money” is an illusion, after all – a trick of the light.  Every dollar of gain or loss has the same value.  After 5+ years of outsized gains, however, will investors sit tight through increased volatility, reasoning that “House money” gives them a buffer to accept lower prices for a while?  Or will they prove truly rational and reduce equity exposure if we see further market churn?  The answer may well lie in the speed and magnitude of any further declines. August may not be the cruelest month, but it may well prove the toughest one of the year for long term investors. 
 
When I started on Wall Street in the 1980s, the Securities and Exchange Commission frowned upon comparing the stock market to gambling.  As an analyst writing a research report, your compliance supervisors would edit out any allusion - no matter how metaphorical - to “Rolling the dice”, “putting it all on black”, “doubling down” or any other reference to games of chance.  Investing was supposed to be a rational discipline, with positive expected returns over time.  Gambling, where the “House always wins”, was an unwelcomed comparison. 
 
What a difference a few decades can make to our understanding of capital markets, for now commentators, academics and even central bankers routinely use the language of gambling to interpret investor behavior.  The relatively new study of behavioral finance appreciates that human beings calculate risk and return through the lens of their personal histories and emotional biases. That’s as true at the gaming tables of Monaco or Macau as it is on the corner of Main and Wall Streets. And don’t think for a minute that the rise of quantitative investing has made capital markets more rational or dampened the effect of “Fight or flight” responses to volatility. Humans still write the code, and their DNA – emotions and all – intertwines with the mathematical precision of programmatic trading like one strand of a double helix.
 
Consider, for example, the concept of “House money”. If you’ve ever had the good fortune to be on the winning side of a few turns with Lady Luck, you know that your decision-making changes as the stack of chips in front of you grows. Wager $100 and win $100, and that second Benjamin feels different from the first. From that point, losing $50 doesn’t feel as bad as if you had lost $50 right off the bat. That makes no rational sense, of course. Both outcomes are negative, and both cost you $50. But the $50 that comes from your winnings is “House money”, and chances are you consider it less seriously than the cash you brought with you to the casino.
 
The Federal Reserve Bank of Atlanta published a very useful paper on the topic of capital markets and “House money” back in 2003 (see link at the end of this note).  The authors both summarized the concept and ran a simple experiment to show how it related to capital markets pricing.  Here is a brief summary of their paper:

• The intellectual anchor for much of behavioral finance is something called “Prospect Theory”, an idea first developed be Amos Tversky and Daniel Kahneman. Contrary to classical financial models, they posited that humans do not evaluate gains and losses along the lines to expected returns. Rather, we consider losses as more psychologically painful than gains prove beneficial. 
   
  An easy example of Prospect Theory: would you rather have a certain $1 million or flip a coin for $5 million/nothing? You should choose the coin toss – the expected value is $2.5 million, well ahead of the $1 million. But the thought of losing out on the sure thing weighs heavily on your mind. What if you lose the toss? How much regret would you experience? So you chose the “Suboptimal” choice, grab the million and feel good about it. 
   
  Daniel Kahneman won the Nobel Prize for Prospect Theory in 2002. 
• Prospect Theory opened the floodgates to reconsider other aspects of financial theory. In 1990 researchers Richard Thaler and Eric Johnson published a paper that outlined the “House money effect”. Their work showed that “Prior outcomes influence real monetary decisions”. Initial losses create risk aversion, while prior gains spur individuals to take greater risks.
• Atlanta Fed researchers Ackert, Charupat, Church and Deaves looked at the effect in the context of price setting in capital markets. They ran experiments where subjects received varying amounts of cash and then bid on fictitious stocks in a market-based game. Sure enough, when the subjects were given more cash up front (the “House’s money”) they bid more aggressively. 

 
So how much “House money” are market participants playing with at the moment?  The answer, by pretty much any measure, is “A lot”.  We’ve had years of gains in U.S. stocks ever since the March 2009 lows for the S&P 500 of 666. Over the past five years the S&P is up by 95%, the NASDAQ by 120%, and the Russell 2000 by 99%. Until recently, those returns came with little in the way of volatility, meaning that investors did not need much fortitude to earn them. Not only are these returns “House money”, but “easy money” as well. 
 
With the price action last week, we seem to be entering a new phase for capital markets. The 4% GDP print, hawkish commentary from parts of the Federal Reserve, and worries over equity valuations all conspire to force a general re-think of appropriate equity allocations and sector weightings. Those considerations aren’t going away any time soon, and nor is the continued slow burn of geopolitical concerns from the Ukraine to the Fertile Crescent. Volatility may have well seen the lows for this capital markets/business cycle. The world likely only gets more complex from here – no more easy money, anyway. 
 
At least one key question is a simple one: “How will investors respond to the recent volatility?” If the concept of “House money” is valid, they may well sit tight for a while. Even after last week’s sell off, after all, the S&P 500 is still up 12.6% over the last year.  The star-crossed Russell 2000 is still 5.3% higher over the same period even though it is 4.1% lower in 2014. The five year numbers are, of course, still pretty fantastic, giving those investors with a long enough memory a lot of psychic “House money” in the memory bank. 
 
Unfortunately, there isn’t much work out there on exactly how much “House money” gamblers or investors are willing to lose before they know to walk away (or run). Fans of technical analysis know their Fibonacci retracement levels by heart – 24%, 38%, 50%, 62% and 100%. Those are the moves that signal the evaporation of house money confidence as investors sell into a declining market. There isn’t much statistical analysis that any of those percentage moves actually mean anything, but enough traders use these signposts that it makes them a useful construct nonetheless.
 
The only other guideposts I can think of relate to the magnitude of any near term market decline. One 5% down day is likely more damaging to investor confidence than a drip-drip-drip decline of 5% over a month or two. The old adage “Selling begets selling” feels true enough in markets with a lot of “House money” on the line. After all, you don’t want to have to walk home from the casino after arriving in a new Rolls-Royce. 
 
Sources:

http://www.frbatlanta.org/filelegacydocs/wp0313.pdf
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1424076

Submitted by Fabrice Drouin Ristori, CEO of GoldBroker.com

Gold Market : An Analysis of Recent Geopolitical, Economic and Banking Events

There are many events to be analysed for these last few weeks. As happens every year, this time of year is, once again, quite fertile.

These events, whether geopolitical, economic, financial or historical (end of the London Gold & Silver Fixing), all exert influence, more or less on the long term, on the precious metals markets.

Within a long-term investment perspective, it is best to analyse first the geo-strategic events, since they might give us a clue on the hard trends in regard to the international monetary system, albeit without short-term fluctuations.

All of those events can be tied together and provide hints that confirm, as I’ve been showing with the rest of Goldbroker.com’s editorial team for several years, that a financial paradigm change is occurring and that it will lead, as has always been the case historically, to a return of a form of gold standard. We are not inventing this: Owning gold has always constituted a means of protecting one’s wealth in times of transition between monetary systems.

By following our analyses, you will be able to keep an eye on the different stages of these changes, in the midst of media fog and financial disinformation.

Spot Prices Performance

Gold and silver did well these last few weeks, since the start of June, coming out of their long-term correction phase, before experimenting a significant correction, Monday 14 and Tuesday 15 (July), following two more attacks on the COMEX.

At a time when both London fixes in gold and silver are being questioned, we have to reckon that this last blatant manipulation attempt was a sign of despair from the manipulators. As Egon von Greyerz states in a new article, the manipulators (Western commercial banks and governments) have almost no physical gold left, and they are desperately trying to kill this bullish sentiment in the markets in order to keep investors from flocking to physical gold and silver, which would make demand explode, at a time when there’s no available physical gold at these artificially-low prices and, thus, no physical gold to insure the convertibility of millions of paper contracts owned by thousands of investors in physical gold.

These last two attacks, at the most illiquid times of the day, constitute new evidence of blatant manipulation. GATA (Gold Anti Trust Action Committee) will gladly add these two new episodes to its long list of proofs it has been gathering for over a decade. And, without a doubt, BAFIN (German financial regulation organism) must have closely watched the price action on Monday and Tuesday. BAFIN has turned out, these last few months, to be the sole regulation agency paying attention to the price manipulation (certainly due to the United States’ refusal to repatriate even a small portion of their gold reserves), since its director stated that the gold market manipulation was much more important than LIBOR’s.

As can be seen, judicial enquiries have progressively moved from LIBOR to Forex and, finally, the gold market. In fact, this is a natural progression, because (confirmed) manipulations of LIBOR and Forex cannot occur unless gold is, also, manipulated.

The main financial and economic media in the West do not cover this phenomenon, or ever so hardly, but we all know who their financial masters are. Trusting their analyses to make investment decisions seems suicidal when, for instance, we know that central banks are buying stock shares and are, thus, pushing stocks higher. But you won’t read about that in the traditional “financial” media.

This media silence contributes to exposing millions of investors to bubble-prone assets (stocks, bonds and real estate, in certain countries).

Whatever the case may be, the manipulators are trapped in all scenarios, because these organised crashes only increase the transfer of physical god and silver toward the East (Asia, Russia, China, India) and lessen their capability to provide physical metals at a time when no heavy buyer (Russia, China, BRICs) is trusting paper gold. So, whatever they do from now on, the end of their capability of manipulating the precious metals’ prices is nearing.

The Zerohedge website, in two articles (read here and here), details the colossal number of gold futures contracts sold in order to crush the prices, on Monday and Tuesday, July 14-15.

Paul Craig Roberts, former State Secretary to the Treasury, has also explained, in a recent article, the scope of this manipulation.

We have been observing this price manipulation phenomenon for several years now, and the length of its duration may drive one to exasperation, but the truth is that reality cannot be manipulated forever. As with any other phenomenon, imbalances end up being corrected in long-term cyclical movements.

COMEX: Disconnect between virtual and physical confirmed on official CME site

A few weeks ago, I published an article focusing on the disconnection between the physical and virtual markets with regard to silver. Another proof of this disconnection can be found just by reading the official definition of silver futures contracts on the official CME website. In the bottom of the page, in the F.A.Q. section, it is written that “price may be managed separately from physical supply”. This does confirm a disconnection in fixing the price of silver on futures contracts. Because we know that, for the moment, as Paul Craig Roberts explains, those futures contracts are what the silver price is based on. In this context, no one can know the real worth of physical silver, given the amount of paper silver contracts floating above a tiny available physical silver market.

Could there be gold confiscation in Germany?

BAFIN confirmed to the German website Goldreporter.de it had asked banks for information about clients having invested in gold, which quickly gave rise to rumours of confiscation from the German authorities.

I do not agree. BAFIN has been, in the last few months, the only regulating agency speaking openly about price manipulation, and has certainly had something to do with Deutsche Bank letting go of its seat in the London Gold Fix.

In a context where Germany has also been told by the United States that it could not even get back quickly a mere tiny portion of their gold stored at the New York Fed, and where Germany is cooling off its relation with the U.S. in favour or Russia and China (Germany just expelled the CIA chief in Germany because of spying accusations).

My take is rather that BAFIN is trying to know the level of exposure of German investors to the paper gold fraud.

BAFIN knows the price of gold is being manipulated, it has stated as much, and this request rather shows it is worried about the consequences of the implosion of the paper gold market for the German investors.

This gold audit, by the way, and this is revealing, only deals with gold derivatives and contracts sold to German investors by banks and investment funds, and not with sales of physical gold. As far as I know, no information was requested from precious metals storage companies.

So BAFIN is most likely worried about a coming implosion in gold derivatives.

Now to the financial/banking sector: Several news items confirm the seriousness of the situation (which, in fact, has been serious since the 2008 crash) and shed light on the fragility of the international banking system. Savers should take note of the deteriorating situation.

Banks are underestimating their risks

As Philippe Herlin writes in his recent analysis for Goldbroker.com, according to some analysts, banks have been revising their risk models in order to lower their required outright funds by underestimating the risks and by grossly overestimating the value of their assets.

And this comes out of the 84th annual report from the BIS (Bank for International Settlements), the “central bank of central banks”, the institution in charge of implementing prudential norms for commercial banks across the globe (Basel III).

Their underestimation of risks puts them in jeopardy, should an un-foreseen event take place.

And, as we’ve seen these last few weeks, un-foreseen events are occurring:

The main banks from Austria (Erste Bank) and Portugal (Banco Espirito Santo) announced some serious problems. There has even been a bank run in Bulgaria.

This puts in perspective ECB chairman Mario Draghi’s announcement about a 1 Trillion euro bail-out plan for banks, even though he’s saying it is to jumpstart credit.

Meanwhile, the IMF is suggesting, again, seizing depositors’ accounts.

The German newspaper Die Welt reported that the International Monetary Fund (IMF), on June 22nd, published a new call to use depositors’ accounts to pay sovereign debt (of course, after having paid the banks’ derivatives).

“The IMF is preparing for another round of confiscating depositors’ accounts”

In the United States, the Securities and Exchange Commission (SEC) will make official a rule making it impossible (we don’t know yet if it will be only temporary) to redeem funds invested in certain money market funds, amounting to a sort of bail-in or capital control in case of a crisis.

In this case, only sums invested in those funds will be impossible to redeem.

Let’s end this report with geopolitical events. Colossal changes are happening; these things take time, but the trend will not be reversed: The move toward global rejection of the US dollar is now underway, it’s a reality. And the rejection of the dollar makes the creation of a new international monetary system mandatory, to which effect the BRIC countries are actively preparing, notwithstanding the refusal of Western countries to modify the current system.

BRICs : Creation of a new development bank to compete with the IMF

The BRICs Development Bank is now a reality. In my articles, since 2011, I have often written about events to come that would confirm this challenge to the current monetary system, and the creation of this BRICs bank is one of those important events.

The case of Germany

Germany, angry about a few situations, such as the ECB’s lax monetary policy, to which it has been strongly opposed for a long time, the refusal of the United States to repatriate even a meagre portion of its gold stored in New York with the Fed in short time, and the revelations of the United States spying in Germany, is starting to walk away from the destructive influence of English-speaking countries and of Europe and toward the East (integration in the Euro-Asia free-trade zone) and the BRICs.

I wouldn’t be surprised to see Germany leave the European Union to join the BRICs which, as we’ve seen, are starting to build a base toward a new monetary system via the creation of their development bank, totally opposed to the IMF.

It’s difficult to find fault with the BRICs trying to walk away from a destructive and predator institution like the IMF. Case in point: the IMF loaned 17 billion to Ukraine under the condition that it doesn’t lose control of its eastern territories.

The IMF’s proposed evolution only consists of implementing their Special Drawing Rights (SDRs), another paper currency experiment without any change in the voting rights, with many countries being under-represented.

Germany’s position is not to be confused with Angela Merkel’s position. German industry leaders, notably, are accusing her of not taking Germany’s commercial interests with Russia at heart. Her position does not reflect the thinking of Germany’s commercial and industrial base, which will certainly push her toward the exit or even an anticipated one, since she is openly talking about leaving office before the end of her mandate in 2017.

Should this anticipated resignation be confirmed, it will reveal the end of the influence of political, banking and financial circles in Germany, and the seizure of control by the industrial leaders. As is always the case, commercial interests do end up dictating a country’s strategic orientations.

Germany’s behaviour, in the months to come, is to be monitored closely. Once its tilting toward the East is really officialised, probably in reaction to the next financial crisis that should come, end of 2014- start of 2015, it will have quick and severe consequences on the European Union and the survival of the euro.

Movements of de-dollarization and defiance against U.S. leadership

Sanctions against Russia are starting to turn against the United States, with nine European countries ready to ignore them, because Russia is a more important commercial partner than the U.S. for certain European countries.

Furthermore, these same countries consider that the Transatlantic Trade and Investment Partnership (TTIP), proposed by the Obama administration, is an attempt to annex Europe in a sort of economic NATO benefiting only American large corporations. Let’s recall that this treaty will place the interests of large corporations above national interests.

Russia’s influence in Europe, due to energy and commercial links that cannot be broken, is leading European countries to ignore the sanctions and to question their use of the dollar.

This questioning of the use of the dollar has even been announced publicly, recently, by two Frenchmen. Let’s hope France will follow Germany in this trend toward closer ties to the East.

TOTAL: Christophe de Margerie, its CEO, announced he was seeing no reason to keep buying oil with dollars, adding that it made perfect sense to use other international currencies for the settlement of oil transactions.

This questioning of the petrodollar by the CEO of one of the largest oil companies in the world is not just candid, when we take into account that the dollar’s stability is based on oil being traded in dollars, which automatically sustains the currency.

Since 2013-14, the direct questioning of the dollar use isn’t coming from small countries prone to conflicts, such as Lybia, Iraq or Iran, but directly from top leaders of important countries that can’t be worried about economic, or even military, pressures (Russia, China).

Another example:

Banque de France: The president of Banque de France, Christian Noyer, who is also a member of the board of governance of the European central bank, announced that sanctions against BNP would bring companies to massively reject the dollar.

He is clearly stating that “commercial transactions between China and Europe must be done in euros and renminbis. Let’s stop using the dollar... this case (sanctions against BNP-Paribas) will have consequences”.

The sanctions that are being imposed directly by the United States to its European partners or the ones it asks them to impose against Russia, at a time when the TTP is being negotiated, are not appreciated at all or even simply ignored, with direct consequences for the dollar.

Toward a new monetary system

All of the events mentioned above are part of the fundamental trend, i.e. a migration toward a new monetary system.

Physical gold is migrating to the East (Russia, China) and, with it, power and influence. We see it with China and Russia progressively imposing their will, building consensus with a great many countries that wish to end American domination made possible by their capacity (privilege) of issuing the world reserve currency.

The saying, “He who holds the (physical) gold makes the rules”, is truer than ever. The announcement of the creation of the BRICs development bank is just the first cornerstone in the new international monetary edifice. All we have to wait for is the first official announcement from the East of a new means of settlement of commercial trade based on one or more tangible assets, with gold. Afterwards, logically, an announcement of the convertibility of certain currencies into gold, or even the creation of a new currency that would be convertible to gold, should be made.

Source: GoldBroker.com

• Gunshots, tear gas in riots over shooting of black Missouri teen (Reuters)
• Russia sends big aid convoy to Ukraine, West sounds warnings (Reuters)
• Maliki Bid to Block Successor Escalates Crisis in Iraq (BBG)
• Poor German data pushes euro toward 9-month lows against dollar (Reuters)
• Derivatives Reincarnate Boosting Debt Wagers in New Era  (BBG)
• Israel Says No Gaza Talks Progress as Hamas Warns on Truce (BBG)
• Traders brace for research crackdown as easy money dries up (Reuters)
• U.S. Bank Profits Near Record Levels (WSJ)
• Unproven Ebola Drugs Are Ethical to Use in Outbreak: WHO (BBG)
• Caesars’ CEO Loveman Says No Qualified Bidders for Revel (BBG)
• Anadarko's Controversial Mozambique Project Shows Appetite for Natural Gas (WSJ)
• Apple prepares Healthkit rollout amid tangled regulatory web (Reuters)
• First-Time Buyers Shut Out of Expanding U.S. Home Supply (BBG)
• Pimco Total Return cut U.S. government debt to 45 percent in July (Reuters)

Overnight Media Digest

WSJ

* Iraq's president appointed a candidate to replace Prime Minister Nouri al-Maliki but the longtime leader refused to step aside, setting up a confrontation as the government struggles to combat a rapidly advancing Sunni insurgency. (http://on.wsj.com/1pKUqOv)

* As Alibaba Group Holding Ltd <IPO-BABA.N> heads towards what could be the biggest-ever initial public offering, its bankers are homing in on one of their biggest challenges: keeping the shares aloft once they start trading.(http://on.wsj.com/1sKDWq0)

* Ukraine agreed to dispatch humanitarian aid, including supplies from Russia, to a separatist stronghold that has been blasted by fighting in recent weeks, after pressure from Moscow and Western capitals to do more to ease civilian suffering.(http://on.wsj.com/1nKfWij)

* Banks are lending to companies and individuals at the fastest pace since the financial crisis, helping propel profits to near-record levels. U.S. banks posted $40.24 billion in net income during the second quarter, the industry's second-highest profit total in at least 23 years, according to data from research firm SNL Financial. (http://on.wsj.com/XdcZ4M)

* UniCredit SpA said Monday a nine-year-old dispute over its purchase of banks in Austria and Germany could last several more years and result in additional payouts to former shareholders of the acquired banks. (http://on.wsj.com/1oFAUUz)

* After four days of pounding targets in northern Iraq, U.S. officials warned Monday that the campaign was unlikely to inflict serious damage to the militant group now controlling large parts of Iraq and Syria.(http://on.wsj.com/1mEfPVK)

* Vascular Biogenics Ltd, which went public last week and traded for 6 days, announced on Friday that it wasn't issuing shares due to failure of key investors to follow through on a commitment to buy stock. (http://on.wsj.com/1swzHBu)

* Along with a creeping Islamist threat on Iraqi Kurdistan and the plight of thousands of Iraqis trapped on a mountainside, there was a scientific calculation behind the U.S. decision to intervene in Iraq: the potential for a 65-foot wave to engulf the northern city of Mosul, and even flood the central capital Baghdad.(http://on.wsj.com/1vA8gsT)

* Price isn't the only issue keeping "Maleficent" and "Captain America" off Amazon.com Inc's virtual shelves. Walt Disney Co's dispute with Amazon also encompasses promotion and product placement on the Amazon website, as well as questions over who makes up the difference when Amazon loses money to match the prices of competitors.(http://on.wsj.com/1kYdRVy)

* Kinder Morgan Inc's $44 billion plan to consolidate its pipeline companies was greeted with excitement by Wall Street, which expects the new streamlined company to snap up other pipeline partnerships. But some investors in Kinder's master limited partnerships may not be happy as the consolidation could leave them with big, unexpected tax bills, tax experts said.(http://on.wsj.com/1pLlM7i)

* J.P. Morgan Chase & Co reached a long-awaited deal to sell roughly half its stake in the portfolio of its buyout arm, One Equity Partners LLC. (http://on.wsj.com/1r6ePBu)

* Intel Corp provided details of its latest advance in manufacturing technology, a milestone that arrived after a delay of more than six months due to technical problems. (http://on.wsj.com/1ulk6FC)

* Former American International Group Inc executive Joseph Cassano cited his Fifth Amendment right to avoid incriminating himself more than 200 times while declining to answer questions posed by the Securities and Exchange Commission in 2009. This is among the disclosures included in 12 transcripts released by the SEC in response to public-records requests from The Wall Street Journal.(http://on.wsj.com/1lQlIPM)

* Anadarko Petroleum Corp wants to build one of the biggest projects ever attempted by a Western energy company in Palma, Mozambique. But Anadarko isn't here for oil. The company is after something more abundant, albeit less lucrative: natural gas located about 30 miles offshore. (http://on.wsj.com/1sKIdd3)

FT

Balfour Beatty Plc is under pressure to prove that it can make it on its own, after the British infrastructure company rejected a second bid from rival Carillion Plc aimed at creating a 3 billion pound construction giant.

Indian billionaire Sajjan Jindal's JSW Steel Ltd is in the final stages of negotiations to buy assets owned by Italian steelmaker Lucchini for a 'nominal sum', two sources say.

Royal Bank of Scotland Group Plc is considering selling the international operations of Coutts - its private bank that counts Queen Elizabeth II and David Beckham as clients - just months before the unit is expected to be fined for helping U.S. citizens evade taxes.

The equity research business in the UK is undergoing huge structural changes that are favouring independent group and hurting investment banking models, after the country's financial watchdog last month endorsed European reforms intended to separate research from dealing commission.

Avanti Communications Group Plc is to launch its next satellite in 2017, as the British satellite operator looks to increase its coverage in Africa and Europe.

NYT

* New York prosecutors brought criminal charges against a dozen payday loan companies and their founder, Carey Vaughn Brown, accusing them of disregarding the state's limits on interest rates on loans. (http://nyti.ms/1kXYOej)

* The Justice Department is using a powerful civil fraud provision to investigate potential fraud in the marketing of securities backed by risky auto loans. This opens up a new front for the government to pursue large monetary penalties against companies that package loans made without paying too much attention to whether the borrowers are credit worthy. (http://nyti.ms/VekHKl)

* Kinder Morgan Inc is consolidating its four related pipeline companies into one and abandoning the master limited partnership structure it helped popularize. Largely because of Kinder Morgan's success, the partnerships have become increasingly popular for energy companies. But now, with Kinder Morgan restructuring as a traditional corporation, questions have emerged about what will happen to the many other master limited partnerships. (http://nyti.ms/1oFBaDb)

* A ruling by a panel of former judges found that Lehman management, not Ernst & Young, was most responsible for setting in motion a maneuver that let Lehman Brothers move billions off its balance sheet. (http://nyti.ms/1A9mfVn)

* Federal regulators said Monday that Kansas had defrauded investors by bringing $273 million of bonds to market in 2009 and 2010 without disclosing that its pension system was deeply underwater and that the investors ran a risk of not being fully repaid. (http://nyti.ms/1r6hcEc)

* JPMorgan Chase & Co has agreed to spin off its private-equity unit through a deal with two investment firms, realizing a long-held goal for the giant bank. (http://nyti.ms/1oFqbEL)

* Chiquita Brands International, the banana producer that is seeking an inversion with a $526 million deal for its Irish rival Fyffes, received an unsolicited offer on Monday from an unlikely pair of private companies. (http://nyti.ms/1uINTFM)

* Pittsburgh International Airport's runways are sitting on enough natural gas to run the whole state of Pennsylvania for a year and a half. (http://nyti.ms/1sSChzv)

* The Aloft hotel in Cupertino, California, will begin testing a robotic bellhop designed to shuttle items from the hotel lobby desk to guest rooms. (http://nyti.ms/1oFlrii)

Canada

THE GLOBE AND MAIL

** The rate of post-traumatic stress disorder among members of the Canadian forces has nearly doubled since 2002, according to a new survey of thousands of soldiers that underscores the mental-health challenge this country and its military personnel face after a decade of bloodshed in Afghanistan. (http://bit.ly/1pLlPzM)

** The Toronto Community Housing Corp has renewed its appeal to the federal government for an C$864 million boost to fund its capital repair backlog. The pitch is part of a C$2.6 billion($2.38 billion), 10-year capital financing plan that Toronto city council unanimously passed in November. (http://bit.ly/1oGgXNs)

Reports in the business section:

** A trio of housewares chains owned by a prominent Canadian retailing family has gone into bankruptcy protection, adding to a growing array of domestic stores that are faltering in the face of pressures from foreign powerhouses and online players.

Bombay & Co Inc, Bowring & Co Inc and Benix & Co Inc, owned by a member of the Isaac Benitah family that also owns Fairweather, International Clothiers and other chains, received court protection from creditors last week, owing $86.6-million, according to court documents. (http://bit.ly/XeuOjY)

NATIONAL POST

** Toronto Mayor Rob Ford publicly reported that an email had been sent to the deputy mayor and his brother, Councillor Doug Ford, threatening to blow up the Toronto City Hall unless the mayor resigns within 12 hours. (http://bit.ly/1oDRAf9)

** Justin Bourque admits he targeted police officers on the evening in June that he fatally shot three Mounties and injured two others in Moncton, New Brunswick, using a semi-automatic weapon. Bourque, 24, pleaded guilty Friday in the Court of Queen's Bench in Moncton to three charges of first-degree murder and two counts of attempted murder. (http://bit.ly/1yqg8JA)

FINANCIAL POST

** American shipping companies were caught flat-footed last holiday season by last-minute online shoppers, but Canada's Cargojet Inc says it has learned from its competitors' mistakes and will double its capacity this Christmas. Delivering packages on time will become an even more important proposition for Cargojet as it prepares for a massive new seven-year contract with Canada Post that will nearly double the size of the company. (http://bit.ly/1mEWfZF)

** Crown Hill Capital Corp and Wayne Lawrence Pushka have been ordered to pay just over C$20 million for breaches of fiduciary duty and for using fund assets for their own benefit. The bulk of the financial penalty meted out by the Ontario Securities Commission on Monday represents "disgorgement" of the funds, on top of C$1.87 million in administrative penalties.(http://bit.ly/1yqi0Ss)

China

CHINA SECURITIES JOURNAL

- The shareholders of Hong Yuan Securities Co Ltd have agreed to be bought by Shenyin Wanguo Securities, it said in a public filing.

SHANGHAI SECURITIES NEWS

- Assets of Chinese trusts stood at more than 12 trillion yuan ($1.95 trillion) at the end of June, according to figures released by the Chinese Trustee Association. The June figure shows a decrease of 240 billion yuan from a month earlier, the first monthly fall seen in the industry.

CHINA DAILY

- Authorities in Tianjin are probing local real-estate agents on suspicion of price collusion, following public complaints of price fixing. The investigation shows that authorities are not exclusively focused on foreign companies, experts told the paper.

- The UK launched a 24-hour priority visa service in Beijing, Shanghai and Guangzhou on Monday. The move to simplify the application process was made to attract more Chinese visitors.

Britain

The Times

BIGGEST UK COMPANIES FEEL SQUEEZE ON MARGINS

Britain's top-listed companies are generating more revenue as the country's economy picks up but the improvement has come at the expense of squeezed profit margins.

The Guardian

OFGEM DEFENDS RECORD OF REFORM OVER BIG SIX ENERGY FIRMS' HIGH PRICES

Ofgem has hit back at claims it may be partly to blame for high prices, after a group of former regulators said it had presided over a weakening of competition in the energy market.

HEATHROW AND GATWICK BOSSES CLASH OVER RIVAL EXPANSION PLANS

Executives at Heathrow and Gatwick have clashed over rival expansion plans after both airports seized on record passenger numbers as justification for building new runways.

The Telegraph

ALIBABA WOOS LUXURY BRANDS AHEAD OF FLOTATION

Alibaba Group Holding Ltd <IPO-BABA.N>, the Chinese Internet shopping giant, is battling to persuade luxury brands to set up stores on the website ahead of its planned flotation.

TAX INVERSION CRACKDOWN 'UNLIKELY TO DERAIL DEALS'

Washington's threatened tax inversion crackdown is unlikely to dampen the deal frenzy sweeping the healthcare sector, according to analysis from Bernstein.

Sky News

CARE GIANT RACES TO AVERT 500 MLN STG SALE COLLAPSE

NHP, the parent company of HC-One, one of Britain's biggest nursing home operators, will hold crunch talks this week aimed at preventing the collapse of a 500 million pound ($839 million) sale of the business.

The Independent

SPORTS DIRECT 'STOPS 20,000 STAFF TAKING OTHER WORK' BY USING ZERO HOUR CONTRACTS

Billionaire Mike Ashley has been revealed as the biggest employer to use the soon-to-be illegal "zero hour" contracts that potentially stop the 20,000 part-time staff at his retail empire getting a second job.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
JOLTs job openings for June at 10:00--consensus 4.6M
Treasury budget for July at 14:00--consensus deficit $96.0B

ANALYST RESEARCH

Upgrades

Abercrombie & Fitch (ANF) upgraded to Buy from Hold at Stifel
Brunswick (BC) upgraded to Strong Buy from Market Perform at Raymond James
Choice Hotels (CHH) upgraded to Market Perform from Underperform at Wells Fargo
Dean Foods (DF) upgraded to Outperform from Neutral at Credit Suisse
El Paso Pipeline (EPB) upgraded to Neutral from Sell at Goldman
Intercept (ICPT) upgraded to Outperform from Market Perform at Leerink
OM Group (OMG) upgraded to Overweight from Equal Weight at First Analysis
Pacific Coast Oil (ROYT) upgraded to Buy from Hold at Stifel
Skullcandy (SKUL) upgraded to Hold from Underperform at Jefferies
Stryker (SYK) upgraded to Buy from Hold at Needham

Downgrades

Applied Micro downgraded to Market Perform from Outperform at FBR Capital
Steven Madden (SHOO) downgraded to Neutral from Buy at Citigroup
Teck Resources (TCK) downgraded to Sell from Neutral at Goldman
Whiting USA Trust (WHX) downgraded to Underperform at Raymond James
magicJack (CALL) downgraded to Hold from Buy at Canaccord

Initiations

Globant (GLOB) initiated with a Buy at Citigroup
HomeAway (AWAY) initiated with a Buy at UBS
Illumina (ILMN) initiated with a Buy at Stifel
PerkinElmer (PKI) initiated with a Buy at Stifel
Renasant (RNST) initiated with a Buy at Jefferies
Sage Therapeutics (SAGE) initiated with an Outperform at Leerink
TerraForm Power (TERP) initiated with a Buy at Citigroup
TerraForm Power (TERP) initiated with a Neutral at Goldman
TerraForm Power (TERP) initiated with a Neutral at JPMorgan
Thermo Fisher (TMO) initiated with a Buy at Stifel
Trupanion (TRUP) initiated with a Buy at Stifel
Trupanion (TRUP) initiated with an Outperform at RBC Capital
Trupanion (TRUP) initiated with an Overweight at Barclays
Trustmark (TRMK) initiated with a Hold at Jefferies
TubeMogul (tube) initiated with a Buy at Citigroup
TubeMogul (tube) initiated with an Outperform at Oppenheimer
Waters (WAT) initiated with a Hold at Stifel

COMPANY NEWS

Intercept Pharmaceuticals (ICPT), which reported Q2 results, announced that 46% of OCA group met FLINT endpoint
Valeant Pharmaceuticals (VRX) received a request for additional information from the FTC in connection with Valeant's proposed acquisition of Allergan (AGN)
Twitter (TWTR) said it now believes approximately 11% of active users only using third-party apps for three months ended June 30
Scotts Miracle-Gro's (SMG) board approved a $500M share repurchase authorization and announced a $2.00 per share special dividend
Telecom Italia (TI) said deadline to sell Argentina unit revised to September 1
Flowers Foods (FLO) said 'remains confident' in long-term growth strategies

EARNINGS

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

Aratana Therapeutics (PETX), Aratana Therapeutics (PETX), ReneSola (SOL), USA Compression (USAC), Towers Watson (TW), Sunshine Heart (SSH), Consolidated Water (CWCO), Endeavour Silver (EXK), Supernus (SUPN), OPKO Health (OPK), Odyssey Marine (OMEX), Chimera (CIM), Fontegra Financial (FRF), Skilled Healthcare (SKH), ICU Medical (ICUI), Aveo Pharmaceuticals (AVEO), Health Insurance Innovations (HIIQ), iPass (IPAS), Hannon Armstrong (HASI), Oncothyreon (ONTY), Athersys (ATHX), DTS, Inc. (DTSI), Biodel (BIOD), Convergys (CVG), Intercept (ICPT), Halozyme (HALO), Lifeway Foods (LWAY), GenMark (GNMK), Sizmek (SZMK), Millennial Media (MM), Relypsa (RLYP), Cyan (CYNI), DealerTrack (TRAK), THL Credit (TCRD), Everyday Health (EVDY), UCP, Inc. (UCP)

Companies that missed consensus earnings expectations include:

Flowers Foods (FLO), Tuniu (TOUR), New Source Energy (NSLP), Contango Oil & Gas (MCF), NGL Energy Partners (NGL), Resolute Energy (REN), NII Holdings (NIHD), Ambac Financial (AMBC), Synergy Pharmaceuticals (SGYP), Forest Oil (FST), , American Midstream reports Q2 EPS (59c), Regado Biosciences (RGDO), Celluar Dynamics (ICEL), Park-Ohio (PKOH), Black Diamond (BDE), GAIN Capital (GCAP), Galena (GALE), Puma Biotechnology (PBYI), 51job (JOBS), Fuel Tech (FTEK), Cytori Therapeutics (CYTX), AdCare (ADK), Ocera Therapeutics (OCRX), Inter Parfums (IPAR), Omeros (OMER), Turtle Beach (hear), Caesar's (CZR), Noranda Aluminum (NOR), Acorn Energy (ACFN), BioSpecifics (BSTC), Towerstream (TWER), Cache (CACH), Continental Building (CBPX), TriplePoint Venture (TPVG), FX Energy (FXEN), AcelRx (ACRX)

Companies that matched consensus earnings expectations include:

Sapiens (SPNS), Mindray Medical (MR), CUI Global (CUI), MasTec (MTZ), magicJack (CALL), Geron (GERN), Nuance (NUAN), Rackspace (RAX)

NEWSPAPERS/WEBSITES

Apple (AAPL) suppliers begin production of next-generation iPads, Bloomberg reports
Apple (AAPL) readies Healthkit launch despite complicated regulations, Reuters reports
Tesla's (TSLA) Model S 'has more than its share of problems,' Consumer Reports says
Amazon's (AMZN) Disney (DIS) dispute about more than pricing, WSJ reports
Sprint (S) CEO to utilize price cuts to 'compete aggressively,' Bloomberg reports
Disney (DIS) cuts employees at DisneyToon Studios, Variety reports

SYNDICATE

Buckeye Partners (BPL) files to sell 2.6M limited partnership units
Callaway Golf (ELY) files $200M mixed securities shelf
DealerTrack (TRAK) files automatic common stock shelf
GreenHunter Resources (GRH) files to sell 517,869 shares for holders
Healthstream (HSTM) files to sell $225M of common stock
Hi-Crush Partners (HCLP) files to sell 3.26M common units representing limited partners
Insmed (INSM) files to sell $80M of common stock
Ligand (LGND) files to sell $225M of convertible senior notes due 2019
Rexnord (RXN) files to sell 10M shares of common stock for holders
Rice Energy (RICE) files to sell 10M shares of common stock
Sprouts Farmers Markets (SFM) files to sell 15M shares of common for holders
Triangle Capital (TCAP) files to sell 4M shares of common stock

• Obama says Missouri shooting death tragic, reflection needed (Reuters)
• U.S. Weighs Iraq Rescue Mission to Save Yazidis (WSJ)
• Maliki says Abadi's appointment as Iraqi PM 'has no value' (Reuters)
• Iran Joins U.S. in Backing Replacement for Iraq’s Maliki (BBG)
• Kurds Push Attack in North Iraq as Maliki Clings to Power (BBG)
• Obama Donors Embrace Corporate Inversions He Criticizes (BBG)
• Syrian Forces Advance on Aleppo, Rebels Fear Another Siege (WSJ)
• China Credit Gauge Unexpectedly Plunges (BBG)
• Israel, Palestinians pursue Gaza deal with ceasefire clock ticking (Reuters)
• Ebola Drug’s Success Bolsters Approach for Other Diseases (BBG)
• With Natural Gas Byproduct, Iran Sidesteps Sanctions (NYT)
• Kazakhs to Hoard Food as Putin Sanctions Rattle Alliance (BBG)
• Behind the Collapse of Portugal's Espírito Santo Empire (WSJ)
• Brokerages face exodus as advisers get better deal in indie firms (Reuters)
• Banks Retreat From Market That Keeps Cash Flowing (WSJ)
• Amazon.com builds brick-and-mortar presence with card-swiping device (Reuters)
• Banking Lobby Backs Stricter Codes of Conduct for Currency Traders (WSJ)

Overnight Media Digest

WSJ

* Alibaba Group Holding Ltd <IPO-BABA.N> moved to address investor concerns ahead of its pending initial public offering by restructuring agreements to gain a bigger share of earnings from financial-services affiliate Alipay. (http://on.wsj.com/1otgBuA)

* The United States is weighing a military mission in Iraq to rescue thousands of Yazidi refugees, a move that risks putting American forces in direct confrontation with Sunni fighters for the Islamic State. (http://on.wsj.com/1uMJdP2)

* Democrats fighting for revenues from oil companies in Alaska are reaching out to an old foe: Sarah Palin. The former GOP governor is a natural ally in a ballot fight to restore a law she signed in 2007 that implemented steep and progressive taxes on the biggest Alaska oil producers. (http://on.wsj.com/1roMOAD)

* A critical part of the plumbing that keeps money flowing through the financial system is experiencing turmoil as new regulations prompt banks to step back from the multitrillion-dollar "repo" market. (http://on.wsj.com/1upIh5Q)

* Syrian government forces have nearly encircled Aleppo, preparing a siege to wrest control of the city from rebels in what would be the biggest blow yet to the three-year uprising.(http://on.wsj.com/1sQdz1Q)

* Portugal's second-biggest bank, Banco Espírito Santo SA , collapsed this month, and Espírito Santo's main holding companies have filed for bankruptcy amid allegations of accounting problems and fraud. Regulators believe Switzerland's Eurofin Holding SA played a key role in financing the failed conglomerate.(http://on.wsj.com/Y2FjH2)

* The Securities and Exchange Commission has launched a broad examination of alternative mutual funds, according to people familiar with the matter, kicking off regulatory scrutiny of one of the hottest and most controversial investment products to be offered to small investors. (http://on.wsj.com/1ppVgBx)

* Ernst & Young LLP wants the New York State Supreme Court to sign off on its recent legal win against New York's attorney general over whether it was responsible for the accounting woes that threw Lehman Brothers Holdings Inc into bankruptcy. (http://on.wsj.com/Vk9QOu)

* The prison sentences last week for two of the best-known anti-fraud specialists in China was a reminder of the stiff risks that can accompany buying and using information that the government deems private. (http://on.wsj.com/1oIc9SI)

* Japan's economy contracted sharply in the second quarter after a sales-tax increase in April sent household spending tumbling, which economists said could pressure the government to take additional stimulus measures. (http://on.wsj.com/1upUV4W)

* A bad year got worse for Ocwen Financial Corp when the mortgage servicer said it would restate earnings because of accounting problems. (http://on.wsj.com/1oKccCJ)

* Escalating tensions with Russia sent Ukraine's currency tumbling to a record low against the dollar Tuesday, a move that could threaten the stability of the country's banking system and raise the prospect of losses for bondholders.(http://on.wsj.com/1r7XqrZ)

* A proposed accounting change expected to force banks to boost the amount of reserves they hold against soured loans could catch many small and midsize lenders unprepared, according to a new survey of bank executives. (http://on.wsj.com/1BcYnkZ)

* President Barack Obama has said that he wants the mission in Iraq to be international in scope, but on Tuesday European countries offered no firm military commitment to fight a powerful Islamic militant force there. (http://on.wsj.com/1p3Pipo)

* Iraqi Prime Minister Nouri al-Maliki grew increasingly isolated on Tuesday, pushed further to the political sidelines as powerful factions at home and his closest regional ally, Iran, threw their weight behind the man nominated to succeed him. (http://on.wsj.com/1pNcW95)

* The mammoth Revel Casino Hotel said it would close next month after two years of operation, possibly carrying away 3,000 jobs from the beleaguered seaside city and dealing a setback to Governor Chris Christie's vision for its renewal. Revel had already filed for bankruptcy twice. (http://on.wsj.com/1ppzygT)

* WellPoint Inc, the second-biggest U.S. insurer, plans to change its name to Anthem Inc, elevating the brand that it now uses for most of its health-insurance products. (http://on.wsj.com/1l0RU8e)

NYT

* Iran is finding a way around Western sanctions to export increasing amounts of an ultralight oil to China and other Asian markets, expanding the value of its trade by potentially billions of dollars a year. (http://nyti.ms/1p3Hsfn)

* Scholars are exhilarated by the prospect of tapping into the vast troves of personal data collected by Facebook Inc , Google Inc, Amazon.com Inc and a host of start-ups, which they say could transform social science research. (http://nyti.ms/1sAp0xT)

* European companies rated below investment grade have turned to issuing junk bonds, following the lead of American businesses. For many companies, the high-yield junk bond market has become essential for raising money now that their local banks are making fewer corporate loans. (http://nyti.ms/1q7vHkX)

* Syncora Guarantee Inc said Detroit's exit strategy had been tainted by what it called the biases of its chief mediator, whose job it was to impartially negotiate out-of-court settlements of as many of the city's outstanding debts as possible. (http://nyti.ms/VhJLA8)

* Audi AG said that in one province, the dealership network of its Chinese joint venture had broken national antitrust rules and would be punished by the government. The Chinese authorities have been looking at many automakers this summer. The focus of the review has been whether automakers have compelled their dealers to set high, standardized prices for replacement parts that the carmakers produced. (http://nyti.ms/1mGWyTI)

* An important reading on the health of the eurozone economy is expected to show that growth stagnated in the recent quarter as German output faltered, confirming the assessment of many analysts that a lasting recovery remains out of reach for the region. (http://nyti.ms/1sQkdoF)

* In a new report, Moody's says banks have remained "conservative" in their lending. The report acknowledged rising auto loan balances, but it concluded that "consumers owe less now than they did during the recession so they can afford to take on more debt." (http://nyti.ms/1ytJWF1)

* Even as Alibaba Group Holding Ltd <IPO-BABA.N>, the Chinese e-commerce juggernaut, moves closer to one of the most anticipated initial public offerings in recent history, potential investors are wondering about the future of its ties to its online payments affiliate Alipay. (http://nyti.ms/Y2PlYB)

* As Valeant Pharmaceuticals International Inc and Pershing Square Capital Management try to take over Allergan Inc , each side appears to be consumed with outmaneuvering the other. (http://nyti.ms/1nNBomH)

* Carlyle Group LP has been searching for unusual investment opportunities and has shown a willingness to take small stakes in companies. Carlyle said on Tuesday it had minority investment in ad site Ganji.com and within the last year, Carlyle bought a minority stake in Beats Electronics and then roughly doubled its investment when the company was sold to Apple Inc. (http://nyti.ms/1ppuzwJ)

* A bidding battle for Australia's Treasury Wine Estates Ltd has called into question the case for standalone wine companies. The company, which owns Penfolds and other global wine labels, could be better managed. But a fragmented market and low brand loyalty also suggests it may not be suitable for public company treatment. (http://nyti.ms/1roW8EF)

Canada

THE GLOBE AND MAIL

** Canadian school boards and universities are relaxing admission criteria for international students, a measure aimed at bringing in much-needed new revenue. (http://bit.ly/Y3tO21)

** The Public Health Agency of Canada is going to donate a made-in-Canada experimental Ebola vaccine to the West African outbreak response. The deputy head of the agency said the country saw the vaccine as a global resource and was in talks with international partners about how best to use the finite number of doses. (http://bit.ly/1l23ikh)

Reports in the business section:

** Statistics Canada has taken the highly unusual step of pulling its latest jobs report after discovering a key mistake in its monthly snapshot of the Canadian economy. Statistics Canada won't say what the mistake was, but it is now rushing to produce new numbers and investigate what went wrong. It has promised to publish a full explanation once the review is complete. (http://bit.ly/1rnWeMz)

NATIONAL POST

** The committee that monitors members of parliament's spending ruled Tuesday that the New Democratic Party had misled House of Commons officials about the location of staff assigned to offices in Quebec and may have also violated election spending rules.(http://bit.ly/XgFePY)

FINANCIAL POST

** In one week, security-holders at Calgary-based Arcan Resources Ltd will gather to vote on an arrangement involving privately held Aspenleaf Energy Ltd. The deal, that has been brought on by the company's "current capital structure and limited credit capacity," has attracted a team of critics. For instance, some holders of two outstanding issues of Arcan's convertible debentures have complained because they will not receive full payment for their investments but rather a 17.5 percent discount.(http://bit.ly/1rpLYU9)

** Tom Kloet extended his reign as chief executive officer at Toronto Stock Exchange owner TMX Group Ltd by two months on Tuesday. But the decision to stay in the job until Oct. 31 did not dampen speculation about his replacement, who sources say could come from an electronic trading firm in the United States. (http://bit.ly/Y3xgd7)

China

CHINA SECURITIES JOURNAL

- Chinese commercial banks have announced plans to issue bonds worth more than 200 billion yuan ($32.5 billion) so far this year, stepping up debt issuance to help boost their capital adequacy ratios in compliance with global rules on bank capital known as Basel III.

- Local governments may loosen property controls further while regulators may encourage banks to offer discounts on loans for first-home buyers as the authorities appear to increasingly tend to move to bolster China's weakening real estate market, sources said.

CHINA'S DAILY

- The Chinese team helping to fight the Ebola virus has denied a report that eight Chinese medical workers who treated patients suffering from the deadly Ebola virus have been placed in quarantine in Sierra Leone.

- Two international subsidiaries of China Mobile Ltd and China Telecom Corp Ltd are joining a $300 million project to lay down a new underwater cable in the Pacific, which will connect Asia and North America.

PEOPLE'S DAILY

- Recent comments by U.S. President Barack Obama that China has failed to play an active role in Iraq can only embarrass the United States, who was an "intruder" in the Iraqi war and had thus been the cause of troubles there, the newspaper, the mouthpiece of the ruling Communist Party of China, said in a commentary.

Britain

The Times

CARILLION TURNS HEAT ON BALFOUR INVESTORS

Carillion Plc has refused to walk away from its rejected 3-billion-pound ($5 billion) offer to merge with Balfour Beatty Plc, and has turned the spotlight on a claim by the construction group's executive chairman that it had an independent future.

The Guardian

VODAFONE CUSTOMERS SEE ONE IN FIVE CALLS FAIL IN RURAL AREAS, FINDS OFCOM

One in five calls made by Vodafone Group Plc customers in rural areas are failing, according to official figures by the telecoms regulator that lay bare the poor service suffered by customers in some parts of the country.

UK FOOD WATCHDOG ADMITS CHICKEN FACTORY BREACHED HYGIENE LAWS

The government's food watchdog has been forced to admit that an initial inquiry which cleared Scunthorpe, one of the UK's largest poultry processing plants, of hygiene failings was misleading.

The Telegraph

CARL ICAHN ATTACKS COMPANIES THAT PROTECT 'UNFIT' CHIEF EXECUTIVES

Carl Icahn, the billionaire activist investor, has accused U.S. companies of protecting chief executive officers who are "unfit" for the job, and called for a radical shake-up of the country's corporate governance standards.

Sky News

L&G TO STUN CITY BY QUITTING INSURERS' BODY

Legal & General Group Plc, Britain's biggest pension fund manager, will stun the City on Wednesday when it discloses that it is terminating its membership of the insurance industry's flagship trade body.

Fly On The Wall Pre-market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Retail sales for July at 8:30--consensus up 0.2%
Business inventories for June at 10:00--consensus up 0.4%

ANALYST RESEARCH

Upgrades

Abengoa Yield (ABY) upgraded to Overweight from Equal Weight at Morgan Stanley
Demandware (DWRE) upgraded to Buy from Neutral at Goldman
Essex Property Trust (ESS) upgraded to Outperform from Sector Perform at RBC Capital
FuelCell (FCEL) upgraded to Outperform from Market Perform at Cowen

Downgrades

CSR (CSRE) downgraded to Hold from Buy at Jefferies
Crestwood Equity (CEQP) downgraded to Underweight from Equal Weight at Barclays
JDSU (JDSU) downgraded to Neutral from Buy at B. Riley
JDSU (JDSU) downgraded to Neutral from Overweight at Piper Jaffray
King Digital (KING) downgraded to Equal Weight from Overweight at Barclays
King Digital (KING) downgraded to Hold from Buy at Deutsche Bank
King Digital (KING) downgraded to Neutral from Overweight at JPMorgan
King Digital (KING) downgraded to Neutral from Overweight at Piper Jaffray
King Digital (KING) downgraded to Sector Perform from Outperform at RBC Capital
Marin Software (MRIN) downgraded to Neutral from Buy at Goldman
Regado Biosciences (RGDO) downgraded to Market Perform from Outperform at Cowen
Southern Company (SO) downgraded to Underweight from Equal Weight at Morgan Stanley
StarTek (SRT) downgraded to Equal Weight from Overweight at First Analysis

Initiations

Amazon.com (AMZN) coverage resumed with a Hold at Stifel
Amtech Systems (ASYS) initiated with an Outperform at Cowen
Care.com (CRCM) coverage resumed with a Hold at Stifel
CoStar Group (CSGP) initiated with a Neutral at Citigroup
Criteo (CRTO) coverage resumed with a Hold at Stifel
Dice Holdings (DHX) coverage resumed with a Hold at Stifel
eBay (EBAY) coverage resumed with a Hold at Stifel
Facebook (FB) coverage resumed with a Buy at Stifel
FireEye (FEYE) initiated with an Overweight at Piper Jaffray
Fortinet (FTNT) initiated with an Overweight at Piper Jaffray
GT Advanced (GTAT) initiated with an Outperform at Cowen
Google coverage resumed with a Buy at Stifel
HomeAway (AWAY)  coverage resumed with a Hold at Stifel
Imperva (IMPV) initiated with a Neutral at Piper Jaffray
LinkedIn (LNKD) coverage resumed with a Buy at Stifel
MakeMyTrip (MMYT) initiated with a Buy at Jefferies
MercadoLibre (MELI) coverage resumed with a Buy at Stifel
NOW Inc. (DNOW) initiated with a Hold at KeyBanc
Novavax (NVAX) initiated with a Buy at Citigroup
Palo Alto (PANW) initiated with an Overweight at Piper Jaffray
Pandora (P) coverage resumed with a Buy at Stifel
Paragon Offshore (PGN) initiated with a Hold at Jefferies
RCS Capital (RCAP) initiated with a Neutral at Citigroup
RetailMeNot (SALE) coverage resumed with a Hold at Stifel
Speed Commerce (SPDC) coverage resumed with a Hold at Stifel
SunEdison (SUNE) initiated with a Market Perform at Cowen
Symantec (SYMC) initiated with a Neutral at Piper Jaffray
TripAdvisor (TRIP) coverage resumed with a Buy at Stifel
Twitter (TWTR) coverage resumed with a Hold at Stifel
Workday (WDAY) initiated with a Buy at Cantor

COMPANY NEWS

Alibaba (BABA) restructured its arrangement with Small and Micro Financial Services Company, including an amendment and restatement of the Alipay IPLA
ChannelAdvisor reported Amazon (AMZN) July SSS up 40.4%, eBay (EBAY) up 9.7%
King Digital (KING) announced a $150M special dividend and acquired game developer Nonstop Games. Total consideration for the acquisition consists of a $6M upfront cash payment and up to $84M of contingent consideration based upon criteria linked to revenues from games developed. King said it expects gross bookings to decline sequentially in Q3, followed by sequential gross bookings growth in Q4
WellPoint (WLP) changing corporate name to Anthem, Inc
Arrowhead Research (ARWR) provided an update on phase 2a study of ARC-520, and said it completed its dosing of 1mg/kg and 2mg/kg dose cohorts. The company's initial blinded data suggest that the magnitude of HBsAg knockdown is similar to non-human primate studies, including the chronically infected chimpanzee reported on previously
Amazon (AMZN) announced credit card reader Amazon Local Register
FleetCor Technologies (FLT) said it will acquire Comdata for $3.45B
Doral Financial (DRL) announced that it filed to delay its 10Q

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Fossil (FOSL), Silvercrest Asset (SAMG), Performance Sports Group (PSG), SunOpta (STKL), Bacterin (BONE), Luxoft (LXFT), Parsley Energy (PE), bluebird bio (BLUE), Cyclacel Pharmaceuticals (CYCC), Bottomline Technologies (EPAY), Inogen (ingn), Opower (OPWR), Myriad Genetics (MYGN), Tahoe Resources (TAHO), Synacor (SYNC), Fate Therapeutics (FATE), La Quinta (LQ), JDSU (JDSU), Cree (CREE), Reed's (REED)

Companies that missed consensus earnings expectations include:
Applied Industrial (AIT), Fortuna Silver Mines (FSM), StarTek (SRT), Tetraphase (TTPH), CafePress (PRSS), Corium (CORI), QuinStreet (QNST), Cerulean (CERU), Netlist (NLST), StemCells (STEM), ViaSat (VSAT), LipoScience (LPDX), Tucows Inc (TCX), Foundation Medicine (FMI), Dipexium Pharmaceuticals (dprx), Ignyta (RXDX)

Companies that matched consensus earnings expectations include:
King Digital (KING), Cimatron (CIMT), Local (LOCM), Arrowhead (ARWR), Kingstone Companies (KINS)

NEWSPAPERS/WEBSITES

Dish (DISH) viewed as favored T-Mobile (TMUS) acquirer after Sprint (S) drops bid, Bloomberg reports
Banks pressing Federal Reserve to delay rule on investments, WSJ says (GS, JPM, MS)
Target (TGT) says supply chain repair will relieve Canada worries, Reuters reports
Opel CFO expects to be profitable in Europe by mid-decade, Detroit News reports (GM)
Gartner: Google (GOOG) Chromebooks to reach 5.2M units in 2014, DigiTimes reports
Kate Spade (KATE) drop not buying opportunity, Barron's says
EverBank Financial (EVER) could have 20% upside, Barron's says

SYNDICATE

Cartesian (CRTN) files to sell 5.61M shares for holders
Celladon (CLDN) 4M share Secondary priced at $9.50
Insmed (INSM) 8.9M share Secondary priced at $11.25
Mattersight (MATR) files to sell 2.89M shares for holders
Newcastle Investment (NCT) files to sell 40M shares of common stock
Rex Energy (REXX) files to sell $125M of depositary shares
Rexford Industrial (REXR) files to sell 15M shares of common stock
Sprouts Farmers Markets (SFM) 15M share Secondary priced at $30.00

Helen Davis Chaitman is a well-known attorney with extensive experience in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. The National Law Journal named her as one of the nation's top ten litigators in 1995. Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).

Helen Davis Chaitman Reviews "In Bed with Wall Street." 

By Helen Davis Chaitman

I confess: Larry Doyle is my hero. Along with a handful of courageous, brilliant people, Larry has spoken out about the corruption that is Wall Street in his wonderful book “In Bed with Wall Street.” This is a must-read if you want your grandchildren to live in a country that protects against the ravages of the super-rich.

Americans like to believe they can teach third world countries about good government... But wait--do we really want to spread the word on how to corrupt our regulators and prostitute our legislators?

The Fraud that is FINRA

Larry shows how, step by step, the rich and powerful have distorted the purpose for the existence of FINRA, the securities industry’s self-funded, self-regulatory organization whose stated purpose is to be Wall Street’s own private police. FINRA is a private organization formed as a result of a merger of the National Association of Securities Dealers and the regulatory arm of the New York Stock Exchange. It is funded and run by the Wall Street firms but it is completely above the law: Unlike even the SEC, FINRA cannot be sued – no matter what it does. Larry describes FINRA as the “Cops on the Take” and he is 100% correct. How convenient that Wall Street supervises itself!

Mary L. Schapiro, former Chief Executive Officer of FINRA and then Chairman of the Securities and Exchange Commission, described FINRA as having overarching objectives of investor protection and market integrity. If you believe that, read Larry’s book. You will see that FINRA exists to enrich itself and to protect the big Wall Street players, no matter how illegal their practices, while tormenting the small players who can’t afford to grease the appropriate palms.

Speaking of greasing palms, Congress does not come cheap. During the ten-year period from 1998 – 2008 – the lead-up to the catastrophic world financial crisis – Wall Street contributed $1.7 billion to favored legislators’ campaign funds and $3.4 billion to lobbyists who, of course, spread the wealth among those who count. Wall Street plays both sides of the aisles; 55% of the contributions want to Republicans; 45% went to Democrats. Wall Street is not interested in one political parties’ credo or the others'. It simply wants to own Congress. And it does. Larry lays out all the details in his book. Nobody can say that Wall Street is reckless with its money. As Larry writes: “The funds may have bought Wall Street the desired ineffectual oversight, but they also bought America and the world a crisis of epic proportions.”

Larry does an excellent job of explaining the crisis with auction rate securities (“ARS”) which represented approximately 10% of the total US money market and of the municipal bond market. And he explains how FINRA failed to protect investors because it was busy protecting its own $650 million investment in ARS--the securities regulator was competing with the public it was supposed to be protecting.

Larry describes how Wall Street outsmarted the public by requiring customers to litigate disputes with the Wall Street firms through FINRA’s own arbitration process. About half of the people in the United States, about 160 million people, own stock or a stock fund.  All of the securities firms require customers to sign agreements that, in the event of a dispute, the customer must litigate through a FINRA arbitration. But guess what?  The FINRA arbitrators “are paid by the regulators that are funded by the industry.” As some have said, “in order to get along, the arbitrators had better go along.”

The Fraud that is SIPC

If you invest in securities and you rely upon your broker’s promise of SIPC insurance, read this book. The Securities Investor Protection Corporation (“SIPC”) is a scam. SIPC was formed by Congress in 1970 to be made up of all the securities firms. SIPC is supposed to assess its members to fund insurance to protect customers whose brokers steal their money or their securities. The insurance provides a substantial inducement for people to do business with securities firms and SIPC’s members enjoyed the increased business that the promise of SIPC insurance provided.

Now let’s talk about how they paid for the insurance. For the entire period from 1996 through 2008 each SIPC member paid a flat fee to SIPC of $150 year in exchange for which each member was able to assure all of its customers that their accounts were insured up to $500,000? That’s not a typo. Goldman Sachs, JPMorgan Chase, Schwab, with their tens of thousands of customers, wrote one check each year for $150 to fund tens of billions of dollars of promised insurance.  And Larry explains how, after the Madoff collapse, SIPC changed its mind about what the insurance was that it had promised investors. Why? Because the SIPC fund was under-funded and the thought of making a special assessment against SIPC’s members never occurred  to SIPC’s members. Should we be surprised?

The Fraud that is Whistleblower Protection

Nor should we be surprised to learn that the SEC’s 20-year whistleblower program rewarded only five people from 1989 – 2009 and the total bounty paid to those five people was less than $160,000 altogether! The SEC just doesn’t like whistling. Larry quotes Preet Bharara, US Attorney for the Southern District of New York, stating that insider trading was “rampant and routine and that this criminal behavior was known, encouraged and exploited by authority figures in several investment funds.”  And, of course, the SEC did nothing, in 20 years, to prosecute insider traders.

Larry recounts the work done by several admirable whistleblowers – all of whom were ignored by the regulators.  The stories make you want to take all of your money out of the stock market and put it in your mattress!

The Fraud that was Congress’ Response to the 2008 Global Economic Collapse

In perhaps the most important chapter of the book, Larry reviews the work of the Financial Crisis Inquiry Commission (“FCIC”) appointed by President Obama to investigate the cause of the global economic collapse.  Clearly, the failure to regulate Wall Street allowed the greed of the Street to destroy the economic lives of millions of innocent people.  And the regulators did nothing to stop at. Wall Street successfully paralyzed them. The star of the FCIC’s hearings was former Citigroup chief underwriter for consumer lending, Richard Bowen. As Larry explained:

Bowen highlighted that he had determined in mid-2006 that more than 60 percent of the mortgages that Citi had purchased from third-party originators and sold to investors such as Freddie Mac and Fannie Mae were defective – that is, they did not meet Citi’s standards.  Bowen sent messages to senior Citi management, including former US Treasury Secretary Robert Rubin, indicating the seriousness of this matter and the urgency with which it needed to be addressed, but his whistleblowing fell upon deal ears.  Bowen also testified that in 2007, the defective mortgages purchased by Citi increased to over 80 percent.

Bowen had been fired by Citi in 2009 after having blown the whistle within the bank.

The FCIC’s final report fell far short of its mission, apparently in an effort to appease the major Wall Street firms. As former SEC Commissioner Arthur Levitt explained, once word of a proposed regulation got out, industry lobbyists would rush to complain to members of Congress with jurisdiction over the specific activity at issue.

The power of Wall Street to decimate legislation intended to protect the public against the greed of securities firms is most evident in the enactment of the Dodd Frank legislation.  Dodd-Frank directed 22 separate federal regulators to undertake work on over 400 separate rules. Years after the enactment of the legislation, most of the regulatory work has still not been done.

As Larry explains, the banks that were too big to fail are now, six years later, much, much bigger. “The four largest mortgage originators (Wells Fargo, JPMorgan Chase, U.S. Bancorp, and Bank of America) now write approximately 50 percent of the home mortgages in our country.  The largest originator, Wells Fargo, has approximately 30 percent of the market.  The four largest banks issue close to 70 percent of the credit cards. The six largest banks by assets (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley) hold assets valued at close to two-thirds of our nation’s GDP.  In 1995, the six largest banks held assets equal to 17 percent of our nation’s GDP. The four largest banks hold close to 40 percent of our nation’s bank deposits, up from 32 percent pre-crisis.  The five largest banks hold 95 percent of the exposure within the quadrillion-dollar (this is a thousand trillion) derivatives market. That figure represents approximately $3.2 million for every man, woman, and child in the United States of America.”

Is there hope for the future?

Larry cries out for change. My favorite sentence in Larry’s book sums up his message – a message which every American should take to heart:

Financial institutions that are “too big to fail,” combined with politicians who are too compromised to govern and regulators who are too captured and corrupted to protect, produce an incestuous cabal that is simply too big to trust.

Check out In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

• Barack Obama's 'vacation from hell' (Politico)
• Russian aid convoy checked; military vehicles mass near Ukraine (Reuters)
• Ukraine Says APCs Entered From Russia to Aid Insurgents (BBG)
• Islamic State Said to Challenge Al-Qaeda for Leadership (BBG)
• Missouri protests calmer after governor puts black police captain in charge (Reuters)
• Finally someone will prove the US is a pyramid scheme (in a 1000 page presentation): Ackman’s Pershing Square Sues U.S. Over Fannie, Freddie (BBG)
• Banks, Financial Firms Load Up on Cheap Debt (WSJ)
• Putin to Meet Finnish President as Threat of Cold War Grows (BBG)
• SEC Casts Wide Net in Probe of Microcap Stock (WSJ)
• Putin Pacific Gambit Threatens New Market (BBG)
• Obama Won't Return Money From Tax Deals He Dislikes (BBG)
• Apple stores user data on servers in China for first time (Reuters)
• Traders Lured to Bet on Power Overloads Worth Billions (BBG)
• Billionaire Lang Walker Says Sydney Home Market ’Too Hot' (BBG)
• China’s Savers Put Record $2.1 Trillion in Wealth Products (BBG)
• Obama says Sinjar siege broken, some personnel to leave Iraq (Reuters)

Overnight Media Digest

WSJ

* Iraqi Prime Minister Nouri al-Maliki relinquished power on Thursday, ending eight years of tumultuous rule and opening a new political chapter that U.S. officials hope will move Iraq towards a more united front against marauding jihadists. (http://on.wsj.com/1uV9DhL)

* Missouri Governor Jay Nixon put the state highway patrol in charge of security in Ferguson on Thursday in hopes of quelling nightly clashes between protesters angry over a police shooting of an unarmed black teenager and SWAT teams using tear gas. (http://on.wsj.com/1qb76f6)

* The euro-zone economy stalled in the second quarter, raising the ugly prospect that the region's meager recovery has lost momentum just as it faces fresh headwinds from Russia and Ukraine. (http://on.wsj.com/1t1A0SF)

* The Securities and Exchange Commission is investigating the auditor of Cynk Technology Corp, the tiny social network that soared to a $6 billion valuation last month and then came crashing back down to earth, say people close to the probe. (http://on.wsj.com/XlpPhd)

* Swedish appliance manufacturer Electrolux AB has held preliminary discussions about acquiring General Electric Co's appliance business, joining a group of other potential suitors considering a deal that could expand their reach in North America. (http://on.wsj.com/YaVYby)

* Alibaba Group Holding Ltd's <IPO-BABA.N> plan for a potentially record-breaking initial public offering is prompting other companies to push back their own stock-market debuts. Royal Bank of Scotland Group Plc's Citizens Financial Group Inc has pushed back the launch of its IPO, which was slated for the second week of September, according to people familiar with the matter. (http://on.wsj.com/1mOTIMo)

* In a risky bid to jolt sagging sales, Coca-Cola Co is paying $2.15 billion to acquire a 16.7 percent stake in energy-drink maker Monster Beverage Corp as part of an asset swap. (http://on.wsj.com/Xlr4gB)

* Federal regulators are looking into whether a hostile offer jointly pursued by Valeant Pharmaceuticals International Inc and activist investor William Ackman to acquire Allergan Inc violates securities laws, according to people familiar with the matter. (http://on.wsj.com/1uTJfER)

* Cutrale Group's bid this week to buy Chiquita Brands International Inc has put Brazil's secretive "Orange King" Jose Luis Cutrale in the spotlight. Cutrale is one of three companies operating in Brazil that account for about 80 percent of global orange-juice exports. (http://on.wsj.com/1l7PXqI)

* Banks and other financial companies world-wide are issuing bonds in the United States at a record pace, taking advantage of this year's surprising slump in interest rates and a brightening outlook for the sector. (http://on.wsj.com/1pQnhkA)

* Supermarket chain Supervalu Inc is investigating a potential data breach that might have affected more than 1,000 stores, according to people familiar with the situation, the latest attack against a big merchant in recent months. (http://on.wsj.com/1vONB4u)

* Apple Inc created the blueprint for a smartphone when it covered the touch screen of its first iPhone in glass instead of plastic. Now, it is betting $700 million that sapphire, a harder and more expensive material, can replace glass and better protect future devices. (http://on.wsj.com/Yb0Qxc)

* Less than 10 days after Gannett Co Inc said it would separate its publishing business from its broadcasting operations, activist investor Carl Icahn disclosed he had accumulated over the past couple of months a 6.63 percent stake in the company and had planned to push for such a split. (http://on.wsj.com/1kFuJ2K)

* Alibaba Group Holding Ltd's film-production arm said it had uncovered possible accounting irregularities and would delay the release of its first-half financial results, and suspend trading of its stock while it investigated the matter. (http://on.wsj.com/1rykThC)

* Consumers may soon be able to pay for their Airbnb rentals or Uber car rides using bitcoin. EBay Inc has been quietly working to integrate acceptance of the virtual currency into its Braintree payments subsidiary, part of its PayPal unit, according to people familiar with the matter. (http://on.wsj.com/1lZBPKK)

FT

Rosneft has asked Russia's government for $42 billion in support to help the oil producer offset the impact of Western sanctions imposed over Moscow's role in Ukraine.

RWE AG has revealed plans to shutter more power stations, as Germany's second-biggest utility by market value struggles to cope with the expansion of renewable energy supply in the country.

Undeterred by Balfour Beatty Plc's rejection of two takeover bids it made, Carillion Plc has approached the rival construction firm's investors, saying that its proposed deal to create a 3 billion pound ($5 billion) giant could deliver annual cost savings of 175 million pounds for the combined business.

U.S. media billionaire Barry Diller has strengthened his portfolio of Internet companies by purchasing Ask.fm - a youth social networking site that allows users to post questions and answers anonymously.

Berlin has banned the use of Uber, an app-enabled taxi service that allows users to summon a ride on their smartphone, after the company was found to be in violation of safety regulations.

NYT

* Coca-Cola Co announced that it had acquired a 16.7 percent stake in Monster Beverage Corp for $2.15 billion. The deal unites the biggest soda maker in the world with the largest energy drink brand in the United States. (http://nyti.ms/XlqFuy)

* Trading linked to congestion on New York State's electric grid, a market intended to protect power companies and ultimately benefit consumers, has made big profits for trading firms. (http://nyti.ms/1m023gq)

* Financial regulators are pushing for an arcane but crucial modification to the contracts that stand behind the $700 trillion global market for derivatives. The change is part of the regulators' efforts to avoid the sort of systemic chaos that occurred after Lehman Brothers Holding Inc crashed. (http://nyti.ms/1l7Ne0l)

* Lenders to Puerto Rico's big electric power authority gave it a breather on Thursday instead of enforcing a looming deadline on the lines of credit the company uses to buy fuel for its power plants. The banks that provide the credit line gave the Puerto Rico Electric Power Authority until March 31 to make good on principal repayments that originally came due at the end of July. (http://nyti.ms/VqZhJN)

* The Securities and Exchange Commission is examining whether Valeant Pharmaceuticals International Inc and Pershing Square Capital Management have broken any laws while pursuing a hostile takeover of Allergan Inc. The inquiry is in its early stages and may not lead to a formal investigation, according to a person briefed on the matter. (http://nyti.ms/1pdJlpN)

* Starbucks Corp announced revisions on Thursday to the way the company schedules its 130,000 baristas, saying it wanted to improve "stability and consistency" in work hours week to week. The company intends to curb the much-loathed practice of "clopening," or workers closing the store late at night and returning just a few hours later to reopen, wrote Cliff Burrows, the group president in charge of American stores, in an email to baristas across the country. (http://nyti.ms/1sZbQZX)

* Samsung Electronics Co Ltd has purchased SmartThings, a start-up that makes accessories that connect home appliances to the Internet. With its expansion, Samsung will be competing with Apple Inc and Google Inc. Google acquired Nest, also a smart home appliance maker, for $3.2 billion this year. In June, Apple introduced HomeKit, a set of software tools to make iPhones more integrated with the smart home. (http://nyti.ms/1BiDbKp)

Canada

THE GLOBE AND MAIL

** Via Rail says another derailment on a troubled northern Manitoba railway line has forced an interruption of passenger services between Thompson and The Pas until further notice. Via said passengers scheduled to travel on the affected routes would be offered alternate transportation and trains would continue to operate between Churchill and Thompson, and The Pas and Winnipeg. (http://bit.ly/VpiPOS)

** Liberal Party of Canada leader Justin Trudeau lashed out on Thursday at the Canadian government over a Postmedia report that Health Canada has approached three doctors' groups to sign onto an anti-pot advertising campaign. During a visit to Saskatoon, he suggested the move was meant as an attack on him and his support for legalizing marijuana. (http://bit.ly/1pwdjpv)

Reports in the business section:

** Spotify, one of the Internet's biggest streaming music services, launched an invitation-only preview of its Canadian site, with plans to open it up to all users soon. Spotify joins a growing list of companies that have also launched Canadian streaming music sites, such as Songza and Google Inc. (http://bit.ly/1ozC2tM)

NATIONAL POST

** Ontario's environment ministry has confirmed that specimens collected on Monday from a bay in Upper Rideau Lake north of Kingston, Ontario, are blue-green algae and that toxins are present. The health unit said McNally's Bay cottagers and residents who draw drinking water from the lake should use an alternative source, as boiling does not remove the toxins. (http://bit.ly/1rzexOU)

** The bizarre case of a former U.S. airman seeking asylum in Canada, claiming he was tortured by U.S. authorities probing his links to the shadowy Anonymous hacker collective, is sparking protest rallies and an international day of action. Matt DeHart, 30, is in prison in Ontario awaiting an Aug. 20 refugee hearing in Toronto during which he will argue his claim for refugee protection. (http://bit.ly/1vQ6Dr4)

FINANCIAL POST

** Energy financier Richard Grafton is planning a series of deals in the Canadian oil patch over the next 18 months after securing C$675 million in funding from a U.S. private equity firm and a UAE sovereign wealth fund. (http://bit.ly/1kG9iP9)

** The Canada Pension Plan Investment Board is mulling two scenarios in this fall's anticipated initial public offering of Chinese e-commerce firm Alibaba Group Holding Ltd <IPO-BABA.N> - selling or taking a larger stake.

Hong Kong

SOUTH CHINA MORNING POST

-- At least a quarter of the 28,000-strong Hong Kong police force will turn out to handle the possible chaos should the Occupy Central movement for democracy carry out its threat to block streets in the main business hub later this month, sources close to the matter say. (bit.ly/1l7Hy6H)

-- Former top judge Andrew Li Kwok-nang has expressed reservations about the view expressed in Beijing's recent white paper on the "one country, two systems" formula that Hong Kong judges have a "basic political requirement" to love the country. (bit.ly/1sHLaOS)

-- The first annual sales target cut announced by a Hong Kong-listed mainland developer has revealed the dilemma facing many players in an industry downturn: to take the hit now or give up a bit later. Fantasia cut its annual sales target to 10 billion yuan ($1.63 billion) from 15 billion yuan after reporting a 68 percent year-on-year slide in first-half profit. (bit.ly/1t0mHD3)

THE STANDARD

-- More than 126,000 people are expected to turn up on Sunday to show they are against the Occupy Central campaign in Hong Kong, according to the Alliance for Peace and Democracy. Convener Robert Chow Yung said more than 1,170 organisations have pledged their support and that the turnout could be even larger than estimated. (bit.ly/1t4O1PJ)

-- CLP Holdings said it will raise tariffs next year but will be at a rate lower than previously estimated. Tariffs had been projected to rise between 3.9 percent and 11.8 percent in CLP's 2014-2018 development plan, with the average annual adjustment at 6.9 percent. (bit.ly/1oyEnFm)

-- Prosperity Real Estate Investment Trust said its interim distributable income rose 11.3 percent to HK$115 million ($14.8 million) from a year earlier. Revenue reached HK$197.8 million, up 18.4 percent, thanks to the contribution of rental and car park income. (bit.ly/1oTcPdf)

HONG KONG ECONOMIC JOURNAL

-- Chinese sportswear maker Peak Sport Products said first-half net profit rose 34.6 percent year-on-year to 120 million yuan ($19.5 million) as sales increased and profit margin improved.

HONG KONG ECONOMIC TIMES

-- Yuzhou Properties Co Ltd said it generated 5.85 billion yuan ($951 million) from property sales in the first seven months of 2014, representing 44.3 percent of its annual sales target.

APPLE DAILY

-- Casual wear brand Giordano said first-half net profit plunged 48.8 percent from a year-ago period to HK$174 million ($22.45 million) amid a weak retail market, high rent in Hong Kong and foreign exchange loss.

Britain

The Times

BERKSHIRE HATHAWAY SHARES TOP $200,000 FOR FIRST TIME

Berkshire Hathaway's share price hit $200,000 for the first time yesterday, showing how far the conglomerate has come since Warren Buffett started buying shares for $7 in 1962 when it was a humble textile company.

SSE puts a national distribution charge in pipeline

Energy bills in the east Midlands and other densely populated areas could rise by up to 37 pound a year to reduce the cost to households of distributing energy in remote parts of the country under proposals put forward by SSE Plc.

The Guardian

UNION CALLS FOR CO-OP BRANCHES TO OUST AMAZON LOCKERS

The GMB union, which has pursued a long-running campaign over pay and conditions at the online retailer's British warehouses, said is calling on Co-operative members to help oust Amazon lockers from the mutual's grocery stores.

The Telegraph

JAMES CROBSY BOWS OUT OF CITY AS PROVIDENT BUYS MONEYBARN

James Crosby, the former boss of HBOS, will relinquish his last company directorship and collect a hefty windfall after Moneybarn, the car insurer he chaired, agreed to be bought by Provident Financial Plc for 120 million pounds ($200 million).

BANK OF ENGLAND FLATLY DENIES SCOTTISH CURRENCY TALKS

The Bank of England has flatly denied claims from the Scottish government that the two have held talks on a currency union should Scotland vote for independence next month.

Sky News

APPLE BANS TWO CHEMICALS FROM PRODUCTION LINE

Apple Inc is banning two potentially hazardous chemicals from its final assembly process for iPhone and iPad. It is removing benzene and n-hexande from its production lines following a five-month campaign from labour activists in China.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Producer Price Index for July at 8:30--consensus up 0.2%
Empire State manufacturing survey for August at 8:30--consensus 20.0
Industrial production for July at 9:15--consensus up 0.3%
Capacity utilization for July at 9:15--consensus 79.1%
UMich consumer sentiment index first read for August at 9:55--consensus 82.3

ANALYST RESEARCH

Upgrades

Alcentra Capital (ABDC) upgraded to Outperform from Neutral at RW Baird
Anglo American (AAUKY) upgraded to Sector Perform from Underperform at RBC Capital
China Mobile (CHL) upgraded to Neutral from Underperform at Mizuho
Cypress Energy (CELP) upgraded to Outperform from Neutral at RW Baird
G&K Services (GK) upgraded to Overweight from Neutral at JPMorgan
Perrigo (PRGO) upgraded to Buy from Neutral at B. Riley
Starwood (HOT) upgraded to Overweight from Equal Weight at Barclays
Ultra Petroleum (UPL) upgraded to Buy from Neutral at UBS

Downgrades

Apollo Global (APO) downgraded to Market Perform from Outperform at Wells Fargo
bebe stores (BEBE) downgraded to Neutral from Buy at Janney Capital
DaVita (DVA) downgraded to Hold from Buy at Deutsche Bank
Fifth Street Finance (FSC) downgraded to Neutral from Buy at Gilford Securities
Harmony Gold (HMY) downgraded to Underweight from Neutral at HSBC
Ignite Restaurant (IRG) downgraded to Neutral from Overweight at Piper Jaffray
K12 (LRN) downgraded to Market Perform from Outperform at Wells Fargo
KKR (KKR) downgraded to Market Perform from Outperform at Wells Fargo
Lithia Motors (LAD) downgraded to Underweight from Equal Weight at Morgan Stanley
New York & Co. (NWY) downgraded to Neutral from Buy at Janney Capital
OCI Partners (OCIP) downgraded to Underweight from Equal Weight at Barclays
OmniVision (OVTI) downgraded to Neutral from Outperform at RW Baird

Initiations

Achillion (ACHN) initiated with an Outperform at FBR Capital
Enanta (ENTA) initiated with an Outperform at FBR Capital
G-III Apparel (GIII) initiated with a Buy at Wunderlich
Gilead (GILD) initiated with an Outperform at FBR Capital
Intercept (ICPT) started with Underperform, $172 target at FBR Capital
NXP Semiconductors (NXPI) initiated with a Buy at Stifel
Palo Alto (PANW) initiated with an Outperform at Imperial Capital
Virtusa (VRTU) initiated with a Buy at Maxim

QUARTERLY HEDGE FUND UPDATES

Warren Buffett’s Berkshire Hathaway:

NEW STAKES: Charter Communications (CHTR), and Now Inc (DNOW). INCREASED STAKES: Suncor (SU), Verizon (VZ), General Motors (GM), Liberty Global (LBTYA), and Visa (V). DECREASED STAKES: Graham Holdings (GHC), ConocoPhillips (COP), DIRECTV (DTV), Phillips 66 (PSX), and Liberty Media (LMCA). LIQUIDATED STAKES: Starz (STRZA)

Carl Icahn:

NEW STAKES: Gannett (GCI). INCREASED STAKES: Navistar (NAV), eBay (EBAY), and Icahn Enterprises (IEP). DECREASED STAKES: Netflix (NFLX). LIQUIDATED STAKES: Forest Laboratories (FRX)

David Tepper’s Appaloosa:

NEW STAKES: Google (GOOG), Mohawk (MHK), Weatherford (WFT), and Ryland (RYL). INCREASED STAKES: Facebook (FB), General Motors (GM), American Airlines (AAL), Priceline (PCLN), and Masco (MAS). DECREASED STAKES: Citigroup (C), Eastman Chemical (EMN), and Du Pont (DD). LIQUIDATED STAKES: QUALCOMM (QCOM), JP Morgan Chase (JPM), MetLife (MET), Trinity (TRN), and Delphi (DLPH)

Paulson & Co:

NEW STAKES: Allergan (AGN), DIRECTV (DTV), Covidien (COV), Hillshire Brands (HSH), and Questcor (QCOR). INCREASED STAKES: Shire (SHPG), Cobalt (CIE), Mallinckrodt (MNK), Family Dollar (FDO), and Dollar General (DG). DECREASED STAKES: Thermo Fisher (TMO), Vodafone (VOD), Freeport-McMoRan (FCX), CNO Financial (CNO), and CBS (CBS). LIQUIDATED STAKES: American Airlines (AAL), Pioneer Natural Resources (PXD), Hess (HES), General Motors (GM), and Digital Realty Trust (DLR)

Soros Fund:

NEW STAKES: CONSOL Energy (CNX), Google (GOOG), Level 3 (LVLT), Time Warner (TWC), and New Oriental (EDU). INCREASED STAKES: YPF SA (YPF), Apple (AAPL), Facebook (FB), AIG (AIG), and American Airlines (AAL). DECREASED STAKES: Teva (TEVA), Liberty Global (LBTYK), Barrick Gold (ABX), EQT (EQT), and Comcast (CMCSA). LIQUIDATED STAKES: FedEx (FDX), Monster Beverage (MNST), Google (GOOGL), Devon Energy (DVN), Marathon Petroleum (MPC)

Trian Fund:

NEW STAKES: Allergan (AGN), DIRECTV (DTV), Covidien (COV), Hillshire Brands (HSH), and Questcor (QCOR). INCREASED STAKES: Shire (SHPG), Cobalt (CIE), Mallinckrodt (MNK), Family Dollar (FDO), and Dollar General (DG). DECREASED STAKES: Thermo Fisher (TMO), Vodafone (VOD), Freeport-McMoRan (FCX), CNO Financial (CNO), and CBS (CBS). LIQUIDATED STAKES: American Airlines (AAL), Pioneer Natural Resources (PXD), Hess (HES), General Motors (GM), and Digital Realty Trust (DLR)

COMPANY NEWS

Monster Beverage (MNST) and Coca-Cola (KO) announced a strategic partnership where Coca-Cola will take a 16.7% stake in the company, as well as swap certain brands with the energy drink maker
SuperValu (SVU) said its computer network experienced criminal intrusion. The company has not determined that any such cardholder data was in fact stolen by the intruder, and it has no evidence of any misuse of any such data
Nordstrom (JWN) said the purchase price for Trunk Club is $350M in stock and the company sees the acquisition dilutive to FY14 EPS by 3%-5%
J.C. Penney (JCP) forecast Q3 and FY14 SSS up mid-single digits
Samsung (SSNLF) acquired home automation startup SmartThings, terms not disclosed

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
J.C. Penney (JCP), JD.com (JD), Banro Corporation  (BAA), SINA (SINA), La Jolla (LJPC), Bridgeline Digital (BLIN), WidePoint (WYY), Extreme Networks (EXTR), Autodesk (ADSK), Agilent (A), Applied Materials (AMAT)

Companies that missed consensus earnings expectations include:
Kite Pharma (KITE), Ultrapetrol (ULTR), Alexco Resource (AXU), Cascade Bancorp (CACB), ZS Pharma (ZSPH), Intrexon (XON), Echo Therapeutics (ECTE), Mandalay Digital (MNDL), Summer Infant (SUMR), Cypress Energy (CELP), Opexa Therapeutics (OPXA)

Companies that matched consensus earnings expectations include:
Weibo (WB), Superior Drilling (SDPI), Professional Diversity Network (IPDN), Lucas Energy (LEI), Paylocity (PCTY), Nordstrom (JWN)

NEWSPAPERS/WEBSITES

Apple (AAPL) considering sapphire glass in upcoming iPhone, smartwatch, WSJ reports (GTAT, GLW)
Sprint's (S) new CEO to introduce 'disruptive' prices next week, Re/code reports
Alibaba's (BABA) Pictures unit uncovers possible accounting issues, AP reports
eBay's (EBAY) Braintree unit considering accepting bitcoin, WSJ reports
Wal-Mart (WMT) sees rise in DVD orders following Disney (DIS), Amazon (AMZN) feud, Bloomberg reports
Wal-Mart (WMT) not a bargain, Barron's reports

SYNDICATE

Biodel (BIOD) files to sell 6.1M shares for holders
Energy Focus (EFOI) files to sell 6.25M shares for holders
Hannon Armstrong (HASI) files to sell 3.18M shares for holders
NeoGenomics (NEO) files to sell common stock
Priceline (PCLN) prices $1B senior notes offering
Selectica (SLTC) files to sell 999,999 shares for holders

While it remains to be seen if Obama can put an end to what has been the hottest M&A trend in 2014, namely engaging in tax redomiciling "inversion" deals, it is clear that the C-suite is delighted to continue pursuing deals which minimize the cash outflows to the US Treasury, with some 52 redomiciling deals done since 1983, 22 taking place since 2009 and another 10 being finalized and many more in the works. But what is the track record of tax inversions when it comes to the bottom line, namely investor returns.  According to a Reuters calculation, "companies that have done such "inversion" deals have failed to produce above-average returns for investors."

The details, from looking back three decades at 52 completed transactions, the review showed:

• 19 of the companies have subsequently outperformed the Standard & Poor's 500 index;
• 19 have underperformed;
• 10 have been bought by rivals;
• 3 have gone out of business;
• 1 has reincorporated back in the United States.

More from Reuters:

Among the poorest performers in the review were oilfield services and engineering firms, all from Texas. Among them was the first of these companies to invert, McDermott International Inc (MDR.N), which moved its tax home-base to Panama in 1983.

 

Drugmakers are dominating the latest wave of inversions and most of them have outperformed the benchmark index. So far in 2014, five U.S. pharmaceutical firms have agreed to redomicile to Ireland, Canada or the Netherlands. Deals that have not been completed were excluded from the review.

 

It is impossible to know how the companies might have fared in the market had they not inverted. Innumerable factors other than taxes influence a stock's performance, and no two of these deals are identical, complicating simple comparisons.

 

But the analysis makes one thing clear: inversions, on their own, despite largely providing the tax savings that companies seek, are no guarantee of superior returns for investors.

...

"For some companies, these inversions are really smart business moves. For others, they're less smart ... You don't always know if it's going to work,"said James Hines, professor of law and economics at the University of Michigan and one of a handful of academics who have closely studied these deals.

Drilling down on case study #1: Foster Wheeler:

The analysis, using Reuters data and analytics, measured simple share price performance against the S&P 500 index using two benchmarks - the date when each company completed its inversion deal, and the date when each deal was announced. With only four exceptions, the inverted companies that were still in business since doing their deals either uniformly underperformed or outperformed on both benchmarks.

 

For instance, U.S. engineering and construction group Foster Wheeler AG announced in November 2000 - when its stock was worth about $45 per share - that it was inverting to Bermuda. The deal, a statement said, was "expected to benefit Foster Wheeler and its stockholders for several reasons."

 

Since the announcement, the company's stock has lagged the S&P 500 by 50 percent; since the deal was concluded in May 2001, it has trailed the index by 83 percent. Foster Wheeler agreed in January 2014 to be acquired by UK rival Amec Plc for about $32.69 per share in Amec stock and cash at the time. The deal is expected to close in the fourth quarter.

Case #2: Eaton:

Ohio's Eaton Corp Plc, a maker of power management products, in 2012 moved its tax domicile to low-tax Ireland by acquiring Cooper Industries, itself an inverted company that reincorporated from the United States to Bermuda in 2002 and then Dublin in 2009. "The acquisition of Cooper was a strategic decision to add scale and breadth to our global electrical business ... The acquisition of Cooper was transformational for our business," said Eaton spokesman Scott Schroeder in emailed comments.

 

When the deal was announced, Eaton Chief Executive Sandy Cutler said it would shave about $160 million off Eaton's annual tax bill. He said business motivations, not tax reductions, were the key reasons for the transaction. Eaton's effective tax rate in 2013 was only 0.6 percent, down from 2.5 percent in 2012 and from 12.9 percent in 2011, said Eaton's 2013 annual report to federal regulators.

 

"The lower effective tax rate for 2013, compared to 2012, was primarily attributable to the effects associated with the acquisition of Cooper, along with greater levels of income in lower tax jurisdictions and additional foreign tax credit utilization," Eaton said in the Securities and Exchange Commission filing.

 

Despite the tax savings, Eaton has underperformed the S&P 500 by 5 percent since completing the Cooper deal in November 2012. But, measuring from the day when the deal was announced in May 2012, Eaton's share price has outperformed the index by 9 percent, Reuters data showed.

Case #3, biotech Xoma, fared so badly it un-inverted 13 years after rushing to expatriate:

The first U.S. drug company in the 52 to complete an inversion was biotechnology group Xoma Corp, which shifted to Bermuda in 1998. Thirteen years later, the company returned its tax domicile to the United States, saying in a statement it wanted to reduce exposure to possibly adverse tax legislation and to come back to a more familiar legal system.

 

Xoma has posted losses since 2010 and, despite returning to California, has underperformed the S&P500 by 95 percent since it went to Bermuda. A spokeswoman said Xoma had no comment.

So with a spotty track record, what is the impetus behind the M&A surge, aside for eager bankers and lawyers happy to collect this advisory fees? Perhaps for once the president is right and it really is just "herd mentality" and doing what is the faddy corporate transaction du jour:

Concern is growing in Washington about inversions. President Barack Obama has criticized a "herd mentality" by companies seeking deals to escape U.S. corporate taxes.

 

Of the 52 inversions and similar redomiciling deals done since 1983, 22 have occurred since 2008, with 10 more being finalized and many more said to be in the works.

 

Following recent deals by major companies such as Medtronic Inc (MDT.N), bankers and analysts have said that another burst of deals is waiting to be unveiled in September.

In any event, if the president has his way, it seems that inversions won't be a hot topic for much longer, and instead yet another government intervention will simply unleash yet another and far more direct way of avoiding paying US corporate taxes: foreign companies buying US-domiciled corporations outright, something which China is surely quite eager to pursue.

Back on April 22, we wrote an article titled "How Bill Ackman Scrambled To Acquire Over $3 Billion In Allergan Calls Knowing Valeant Would Submit A Bid" in which we presented the following chart:

... which showed how Bill Ackman had accumulated a massive 9.7% stake in AGN stock through call options, making him the largest stakeholder of the company.

What happened after this fervent accumulation spree, driven by Ackman's advance knowledge that Valeant would submit a bid for Allergan, is that news was purposefully leaked that Ackman was about to activist on Allergan in a fight that has lasted for just under 4 months but is so for not going quite Ackman's way with Allergan refusing to relent. The stock soared, and Ackman made a killing on his calls, allowing Pershing Square to return about 30% YTD, a fact which has prompted Bill Ackman to put his recent investing debacles with Herbalife and J.C.Penney behind him and boldly proclaim he is preparing to take his hedge fund public.

Our take on what Ackman did in collusion with Valenat was clear:

"Where the story, however, would becomes a near-criminal farce if the US actually had a regulator which itself was not an agency designed to promote and reward criminality (in hopes of getting a job there as a kickback), is that as Valeant was preparing to announce its bid, Pershing Square - well aware of what was coming - was buying, and buying, and buying Valeant stock. Actually, Akman scratch that - Ackman bought almost no stock: in fact he only bought some $76 million in AGN stock in late February. The balance: all call options, accumulated on an almost daily basis through March all the way until April 21, the day the news was leaked.

To be sure, Ackman has denied he frontran the Allergan announcement, saying he consulted countless lawyers among which even former SEC chief enforcer (and former Deutsche Bank compliance officer).

As NYT reported, "before leaping into this particular abyss he consulted, deliberately, with Robert Khuzami, the former head of enforcement at the S.E.C., who is now a $5 million-a-year-man at Kirkland & Ellis, the Wall Street law firm. Mr. Khuzami assured Mr. Ackman that buying nearly $4 billion of Allergan’s shares knowing that Valeant intended to start a hostile takeover at a premium to market did not violate the S.E.C.’s rule 10b5-1 about insider trading.... Indeed, the onetime regulator told Mr. Ackman that he was so sure of his legal advice that he would welcome his former S.E.C. colleagues to call him and discuss it with him."

It is unknown if the SEC called, but what is clear is that last week the SEC announced it had opened an investigation into whether Ackman broke insider-trading laws with his buying spree of AGN calls. Per the WSJ: "The Securities and Exchange Commission civil probe is focused on potential breaches of insider-trading laws, one of the people said. The inquiry is at a relatively early stage and may not lead to any enforcement action, the person added."

"We are confident that the trading was completely lawful," Valeant said Thursday.

It remains to be seen if frontrunning the general public on collusive, material, non-public information that a strategic would be about to announce a bid for Allergan is indeed "completely lawful", however we do have a question: now that the SEC is formally investigating Ackman for what may be a massive frontrunning scam, is it also looking at all the other hedge funds which reported brand new stakes (some of which also entirely in the form of calls) in Allergan in the second quarter?

The reason we ask is that as everyone knows, in order to diffuse the scent of criminality and dilute their culpability, what hedge fund managers, especially of the activist variety, will do nearly all the time ahead of a significant public announcement of a major stake, is to hold an "idea dinner" in which they preannounce to a select group of close friends what they are doing. As such, what ends up happening is that the benefactor of what may be an illegal tip off, or in this case collusion, is not only entity, but numerous, thus making it very difficult for the SEC to isolate just who "leaker zero" was, and who benefited from the information - certainly complicated if the beneficiaries are more than a dozen.

Presenting exhibit A: this is the list of hedge funds and prop trading desks that according to Bloomberg (and CapIQ) announced brand new and quite material stakes, in Allergan, after building up a position some time in the second quarter, having no holdings as of the first quarter.

It goes without saying that the list of "position initiators" is the who's who of Idea Dinner participants with names such as York, Perry, Mason, Och Ziff, Eton Park, Viking, and so on.

So, to recap: if the SEC is indeed serious about getting to the bottom of the Allergan insider-trading scam, is it also looking into just how these hedge funds decided to buy into Allergan in a quarter in which the stock soared on the Valeant/Ackman news?

Because while it is perfectly legal if these funds did their homework and rather "mysteriously" all decided to buy into the stock at the same time, or put on M&A arbs after the hostile bid announcement, one wonders just how legal it would be if one or more of these investors only bought AGN stock after getting a "sure thing" tip from Ackman that he was about to go activist on Allergan with Valeant money, something which is certainly illegal.

All that said, we aren't holding our breath on the SEC actually doing its job for once, and certainly not before Pershing Square goes public. After all can't hinder "capital formation" in these here unrigged markets.

Over six weeks ago we were the first to bring the investing world's (and SEC's) attention to CYNK technologies - a revenueless, assetless 'social network' shell that rapidly exploded in price and market cap soared to $6 billion. Since then it has come crashing back to 'sanity' levels - i.e. worthless - and now, as WSJ reports, The Securities and Exchange Commission is investigating. Their initial findings show a number of 'repeat offenders' linked to several stocks that suffered suspicious trading - just as we noted here...

As WSJ reports,

Even in the boom-and-bust universe of penny stocks, Cynk was a supernova—soaring 36,000% before the SEC suspended trading, then losing almost all of the gains after the halt was lifted.

 

Cynk's eye-popping valuation—given it reported no assets and only one employee—briefly made it the talk of Wall Street. But the affair also highlighted a complex web of people who were connected to Cynk and other microcap companies that have soared and sagged.

 

Peter Messineo, a 53-year-old accountant from Palm Harbor, Fla., is the auditor being scrutinized. He is one of a number of "repeat players" linked to several stocks that suffered suspicious trading who are being looked at by the SEC, as it shifts its tactics in its battle against penny-stock fraud, the people said.

 

 

 

 

The SEC is looking at whether some lawyers and accountants are liable for helping to enable penny-stock frauds, either by signing off on phony information or simply not asking the right questions, said people close to the agency.

 

...

 

Mr. Messineo, who hasn't been accused of any wrongdoing, said he was just a "bystander" at the Cynk stock blowup and there is no reason he should come under scrutiny."The SEC should look into whatever they want to, that's their job. But I had no connection to any suspicious trading and I stand by my audits," he said.

 

The Public Company Accounting Oversight Board, which polices auditors, said its routine 2011 inspection of Mr. Messineo showed "deficiencies" in his audits.

 

...

 

The SEC still is investigating what happened with Cynk, said people close to the agency. It isn't clear who, if anybody, made significant profits from the stratospheric stock increase. A representative of Cynk couldn't be reached for comment.

*  *  *

In summary - you're welcome SEC. But, of course, all the time the Fed is encouraging the dash-for-trash trade with its ever increasing put strike, this kind of fraud will continue to find willing get-rich-quick investors to to fuel the insanity.

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...

It was in June of 2011 when we reported that Bank Of America agreed to pay $8.5 billion to settle mortgage (mis)representation suit, where we said the bank was "about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry." Fast forward 3 years later when Bank of America once again makes history with its latest, and literally greatest, mortgage settlement with the US government, putting all of its MBS transgressions in the past, and which will cost the bank some $16.65 billion (of which, however, some $7 billion will be "consumer relief" and the remainder, which will have a cash portion consists of $5.02 billion in civil monetary penalty, including $4.63 billion in compensatory remediation payments, likely tax-deductible), a new record, and allow the bank to continue adding back "one-time, non-recurring" litigation charges to its adjusted, non-GAAP bottom line, thus once again "beating expectations".

Eric Holder has had a busy week - solving Ferguson's problems yesterday to record penalties for BofA today:

• BOFA AGREES TO PAY $16.65 BILLION TO END U.S. MORTGAGE PROBES
• BOFA U.S. SETTLEMENT INCLUDES $7 BILLION IN CONSUMER RELIEF

However...

• BOFA: SETTLEMENT DOESN'T COVER POTENTIAL CRIMINAL CLAIMS

At this point it is probably worth recalling what we wrote last week, namely that The Price To Keep Bankers Out Of Jail, is now $110 Billion And Rising:

Six years after the greatest financial crisis in modern history, not a single prominent - and bailed out - banker (or frankly any for that matter) has gone to prison. Still, in the great squid pro non-jail quo, regulators and the DOJ have had to be appeased somehow. That "somehow", as has been revealed over the past several years, is with quarter after quarter of massive legal charges, settlements, penalties and so on. Of course, since the banks wouldn't exist in the first place if it wasn't for a multi-trillion taxpayer bailout, they don't mind because the math is quite simple: being converted into a government utility is better than being bankrupt anyday. Also, it is shareholder money, not an actual clawback (oh, the horror).

 

So what is the total amount of shareholder (and by implication, taxpayer) money that has been spent by the bankers to distract regulators and the "cops" from not jailing a single one of them? According to the following chart from the WSJ, just the six biggest offenders have spent over a whopping $110 billion to keep the government happy and the US prison population in check.

 

 

Here, one could add a tangent, that the more money spent on settlements by any given bank, the more in need of a bailout it was in the first place. In which case one dreads to think just how bankrupt Bank of America will be when the next inevitable crisis hits, and how many trillions in taxpayer bailout funds it will need next time around...

And while in the past banks have gotten away without admitting or denying guilt, in this case things are different:

Bank of America admits to the facts set forth below and acknowledges that its conduct violated the federal securities laws.

Click image for live feed from Bloomberg (no embed)

Full SEC Statement:

Bank of America Admits Disclosure Failures to Settle SEC Charges
Bank Also Resolves Separate SEC Case in $245 Million Settlement

 

Washington D.C., Aug. 21, 2014 — The Securities and Exchange Commission today announced a settlement in which Bank of America admits that it failed to inform investors during the financial crisis about known uncertainties to future income from its exposure to repurchase claims on mortgage loans.

 

Bank of America also is resolving securities fraud charges that the SEC filed last year related to a residential mortgage-backed securities (RMBS) offering.

 

Bank of America has agreed to settle the two cases by paying $245 million as part of a major global settlement announced today by the U.S. Department of Justice in which Bank of America will pay $16.65 billion to resolve various investigations involving violations of laws regulated by other federal agencies.

 

“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” said Rhea Kemble Dignam, regional director of the SEC’s Atlanta office.  “Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws.”

 

In new charges filed by the SEC today in a settled administrative proceeding, Bank of America admits that it failed to disclose known uncertainties regarding potential increased costs related to mortgage loan repurchase claims stemming from more than $2 trillion in residential mortgage sales from 2004 through the first half of 2008 by the bank and certain companies it acquired.  In connection with these sales, Bank of America made contractual representations and warranties about the underlying quality of the mortgage loans and underwriting.  In the event that a loan buyer claimed a breach of a representation or warranty, the bank could be obligated to repurchase the related mortgage loan at its outstanding unpaid principal balance.

 

According to the SEC’s order, Regulation S-K requires public companies like Bank of America to disclose in the Management’s Discussion & Analysis (MD&A) section of its periodic financial reports any known uncertainties that it reasonably expects will have a material impact on income from continuing operations.  Bank of America failed to adhere to these requirements by not disclosing known uncertainties about the future costs of mortgage repurchase claims when filing its financial reports for the second and third quarters of 2009.  These uncertainties included whether Fannie Mae, a mortgage loan purchaser from Bank of America, had changed its repurchase claim practices after being put into conservatorship, the future volume of repurchase claims from Fannie Mae and certain monoline insurance companies that provided credit enhancements on certain mortgage loan sales, and the ultimate resolution of certain claims that Bank of America had reviewed and refused to repurchase but had not been rescinded by the claimants.

 

In the SEC’s original case against Bank of America filed in August 2013, the agency alleged that the bank in its own words “shifted the risk” for losses to investors when it failed to disclose that more than 70 percent of the mortgages backing the RMBS offering called BOAMS 2008-A originated through its “wholesale” channel of mortgage brokers unaffiliated with Bank of America entities.  Bank of America knew that such wholesale channel loans – described internally as “toxic waste” – presented vastly greater risks of severe delinquencies, early defaults, underwriting defects, and prepayment.

 

As part of the global settlement, Bank of America agreed to resolve the SEC’s original case by paying disgorgement of $109.22 million, prejudgment interest of $6.62 million, and a penalty of $109.22 million while consenting to permanent injunctions against violations of Sections 5, 17(a)(2), and 17(a)(3) of the Securities Act of 1933.  The settlement is subject to court approval.  To settle the new case, Bank of America agreed to pay a $20 million penalty while admitting to facts set out in the SEC’s order, which requires Bank of America to cease and desist from causing any violations and any future violations of Section 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20 and 13a-13.

 

The SEC’s investigation into Bank of America’s MD&A-related violations was led by Mark A. Troszak, Kristin B. Wilhelm, and Peter J. Diskin in the SEC’s Atlanta office.  The investigation into Bank of America’s RMBS-related violations was led by Mark Eric Harrison and Aaron W. Lipson, and the litigation was led by Ms. Wilhelm with assistance from Mr. Harrison.  The investigations were supervised by Ms. Dignam and William P. Hicks, associate regional director for enforcement in the Atlanta office.  The SEC appreciates the assistance of the Justice Department and the U.S. Attorney’s Office for the Western District of North Carolina.

Full SEC Charge:

• 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

• Clearly it's time to bomb Assad (on Qatar instructions): Islamic State executes dozens of Syrian army soldiers (Reuters)
• Ukraine Declares Russian Invasion as Sanctions Threat Raised (BBG)
• Ukraine Reports Russian Invasion on a New Front (NYT)
• German Unemployment Rises as Risks to Economy Build (BBG)
• Ebola spreads to Nigeria oil hub Port Harcourt (BBC)
• FBI Probes Possible Hacking Incident at J.P. Morgan (WSJ)
• FBI, Secret Service investigate reports of cyber attacks on U.S. banks (Reuters)
• If you like your Venezuela, you can stay in Venezuela: Airlines Abandon Fliers Amid Currency Dispute (WSJ)
• Boomer Wealth Dented by Mortgages Poses U.S. Risk (BBG)
• People Aren't Buying Guns (BusinessWeek)
• Icelandic Bardarbunga Volcano Update: Fractures, Sinkholes Spotted During Research Flight (Weather Channel)
• Silva Shakes Up Brazilian Election (FT)
• Samsung unveils smartwatch that can make calls (Reuters)

Overnight Media Digest

WSJ

* The Islamic State runs a self-sustaining economy across territory it controls in Syria and Iraq, pirating oil while exacting tribute from a population of at least eight million, Arab and Western officials said, making it one of the world's richest terror groups and an unprecedented threat. (http://on.wsj.com/1lg9Qvt)

* The Federal Bureau of Investigation is probing a computer-hacking attack on J.P. Morgan Chase & Co and as many as four other banks, in what people familiar with the probe described as a significant breach of corporate computer security. (http://on.wsj.com/1td4fso)

* Argentina's international reserves are starting to dwindle in the wake of the country's second sovereign-debt default in almost 13 years, putting added stress on the peso and an economy believed to be in recession. (http://on.wsj.com/1zHU1Pu)

* Alibaba Group Holding Ltd <IPO-BABA.N> reported big growth in revenue from mobile devices, which may bolster its case next month when the Chinese e-commerce giant begins to pitch investors on its long-awaited initial public offering. (http://on.wsj.com/1qAtKl3)

* A federal judge on Wednesday denied a request from Apple Inc to bar Samsung Electronics Co from selling smartphones and tablets in the United States that infringe on Apple patents. Apple had sought a permanent injunction against certain Samsung products after a judge and jury found in May that the Korean firm had infringed on three of its patents in a high-profile intellectual property dispute. (http://on.wsj.com/1tEPAVN)

* With Venezuela holding back on releasing $3.8 billion in airline-ticket revenue because of strict currency controls, Delta Air Lines Inc, American Airlines Group Inc and other airlines have slashed service to Venezuela by half since January. (http://on.wsj.com/1pjKopL)

FT

The head of the International Monetary Fund, Christine Lagarde, is facing a formal investigation by a French court for alleged negligence in a political fraud affair dating from 2008 when she was finance minister.

The European Central Bank has hired BlackRock Solutions to provide consultancy services in its preparations for a programme to buy asset-backed securities.

Sales at Tesco slipped 4 percent on a quarterly basis according to industry data, highlighting the wounds inflicted by the supermarket price war on Britain's No.1 grocer.

The battle for Brazil's telecoms market is hotting up after one of the country's largest phone companies, Grupo Oi SA , unveiled plans to take over Telecom Italia's local mobile business.

Europe's largest budget carrier Ryanair is set to offer "business class" service on all of its flights as it tries to gain a bigger share of the European corporate travel market.

Fashion chain Zara, owned by Spain's Inditex, pulled from sale on Wednesday a striped children's top decorated with a large six-pointed star following public outcry that it resembled clothing worn by inmates in Nazi concentration camps during the Holocaust.

NYT

* A number of United States banks, including JPMorgan Chase & Co and at least four others, were struck by hackers in a series of coordinated attacks this month, according to four people briefed on a continuing investigation into the crimes. (http://nyti.ms/VREJu6)

* Christine Lagarde, the head of the International Monetary Fund, said on Wednesday that French prosecutors had placed her under formal investigation, in an escalation of a long-running inquiry into a murky business affair that dates to her time as finance minister under President Nicolas Sarkozy. (http://nyti.ms/1sBSnfy)

* With less than a month before its initial public offering, the Alibaba Group Holding Ltd <IPO-BABA.N> is intent on showing just how profitable - and focused on mobile - it truly is. The Chinese e-commerce behemoth disclosed on Wednesday that its profit nearly tripled in the quarter that ended June 30, to $2 billion. Its sales climbed 46 percent, to $2.5 billion. (nyti.ms/1tXKbHr)

* A British regulator fined Royal Bank of Scotland Group PLC 14.5 million pounds, or about $24 million, on Wednesday for failing to offer proper advice to mortgage customers, and criticized the bank for its delays in responding to the initial complaints. (nyti.ms/1qgvMFK)

* Tyson Foods Inc has reached a deal with the U.S. Justice Department to sell its hog-purchasing business as part of its planned $7.7 billion acquisition of Hillshire Brands Co . The Justice Department said Wednesday that it would require Tyson to sell its Heinold Hog Markets unit to win antitrust approval for the merger. (nyti.ms/1rBpkwM)

* Lawmakers and governor Jerry Brown of California on Wednesday said they had reached an agreement to expand the California film incentive program, capping a drive by entertainment industry unions, filmmakers and executives to bolster sagging movie and television production in the state. (http://nyti.ms/1qiJBn7)

* The Securities and Exchange Commission unanimously approved rules on Wednesday that would require issuers of asset-backed securities - complex investments based on mortgages, auto loans or other types of debt - to disclose more information about the underlying loans. (nyti.ms/1nFOJ14)

* Chiquita Brands International and Fyffes PLC tried to reassure investors about their planned merger, saying on Wednesday that they now expected the combined company to achieve an additional $20 million in annual cost savings by 2016. (nyti.ms/1leh17k)

* The federal government is expected to finish its fiscal year with a relatively modest budget deficit as the gap between revenue and spending continues a sharp decline, the Congressional Budget Office said Wednesday. (http://nyti.ms/1q6GjEO)

China

CHINA SECURITIES JOURNAL

- Yu Shengfa, vice president of e-commerce giant Alibaba's <IPO-BABA.N> future financial company, said the company has submitted applications to related regulators to set up "Ali Bank" which could be approved in September.

SHANGHAI SECURITIES NEWS

- Shanghai's municipal government has published a document outlining its strategies to develop the city into a global trading centre, including plans to build international trading platforms for commodities such as natural gas and iron ore in its free-trade zone.

SECURITIES TIMES

- China could implement real estate registration system in 2017, said Leng Hongzhi, an official at the Ministry of Land and Resources.

CHINA DAILY

- Lenovo Group Ltd will soon settle a year-old class action lawsuit over laptop malfunctions in the United States for approximately $70 million.

Britain

The Times

SALMOND'S SCOTLAND WILL LIVE IN ETERNAL POVERTY, SAYS BROWN

Inequality and poverty could "survive until doomsday" if Alex Salmond wins Scotland's independence referendum, according to former British Prime Minister Gordon Brown.

TESCO'S WOES DEEPEN AS SHOPPERS CHECK OUT

Sales at Britain's largest supermarket group have plunged and its market share has slipped again, highlighting the challenge facing Dave Lewis, Tesco's incoming chief executive.

The Guardian

DAVID CAMERON MULLS JOINING OBAMA IN BOMBING ISIS IN IRAQ

David Cameron is planning to indicate to U.S. President Barack Obama and other NATO leaders at a summit in Wales next week that Britain is keeping open the option of joining the United States in launching air strikes against forces of the Islamic State in Iraq.

CHRISTINE LAGARDE TO BE INVESTIGATED FOR ALLEGED ROLE IN POLITICAL FRAUD CASE

The head of the International Monetary Fund, Christine Lagarde, has been charged with "simple negligence" over her handling of a controversial 400 million euro payout to French business tycoon Bernard Tapie when she was finance minister.

The Telegraph

DECLARE THE SOCIAL MIX OF YOUR STAFF, BRITISH COMPANIES TOLD Alan Milburn, head of the Social Mobility and Child Poverty Commission, condemns the scale of "elitism" at the top of British public life as he calls for companies to engineer a more socially balanced workforce.

Sky News

RYANAIR LAUNCHES 'BUSINESS CLASS' BENEFITS The no-frills carrier sees advantages of offering the business traveller a more flexible experience as part of its new approach.

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Second estimate of Q2 GDP at 8:30--consensus up 4.0%
Jobless claims for week of August 23 at 8:30--consensus 300K
Pending home sales index for July at 10:00--consensus up 0.5% for the month

ANALYST RESEARCH

Upgrades

Cott Corp. (COT) upgraded to Buy from Hold at Stifel
First Horizon (FHN) upgraded to Outperform from Market Perform at Keefe Bruyette
National Bank of Canada (NTIOF) upgraded to Perform from Underperform at Oppenheimer
Randgold Resources (GOLD) upgraded to Neutral from Underweight at HSBC

Downgrades

Brown Forman downgraded to Hold from Buy at Deutsche Bank
GT Advanced (GTAT) downgraded to Underperform from Market Perform at Raymond James
Genuine Parts (GPC) downgraded to Neutral from Buy at SunTrust
InterMune (ITMN) downgraded to Neutral from Buy at UBS
Sungy Mobile (GOMO) downgraded to Perform from Outperform at Oppenheimer
Visa (V) downgraded to Market Perform from Outperform at Raymond James
Williams-Sonoma (WSM) downgraded to Equal Weight from Overweight at Morgan Stanley

Initiations

Advance Auto Parts (AAP) initiated with a Buy at SunTrust
Allstate (ALL) initiated with a Neutral at Compass Point
AutoZone (AZO) initiated with a Neutral at SunTrust
Cooper Tire (CTB) initiated with a Neutral at SunTrust
Farmland Partners (FPI) initiated with an Outperform at FBR Capital
FireEye (FEYE) initiated with a Buy at Stifel
GasLog Partners (GLOP) initiated with an Overweight at Barclays
Goodyear Tire (GT) initiated with a Buy at SunTrust
ITC Holdings (ITC) coverage resumed with an Equal Weight at Barclays
Mercury General (MCY) initiated with a Neutral at Compass Point
Monro Muffler (MNRO) initiated with a Reduce at SunTrust
Monro Muffler (MNRO) initiated with a Reduce at SunTrust
O'Reilly Automotive (ORLY) initiated with a Buy at SunTrust
PGT, Inc. (PGTI) initiated with a Neutral at SunTrust
Safety Insurance (SAFT) initiated with a Buy at Compass Point
WEX Inc. (WEX) initiated with a Hold at Deutsche Bank
Whole Foods (WFM) initiated with a Neutral at Wedbush

COMPANY NEWS
DuPont (DD) to pay $1.28 to resolve toxic gas leak allegations with DOJ, EPA
Deutsche Bank (DB) fined GBP4.7M by FCA for failing to properly report transactions
CME Group (CME) promoted John Pietrowicz to CFO
China Recycling Energy (CREG) chairman said its chairman made additional $18.9M investment in the company
Lear (LEA) signed a definitive agreement to acquire Eagle Ottawa for $850M
Keurig Green Mountain (GMCR) announced the appointment of José Octavio Reyes Lagunes, the retired vice chairman of The Coca-Cola Export Corporation (KO), to its board effective August 25

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Violin Memory (VMEM), Workday (WDAY)

Companies that missed consensus earnings expectations include:
Coty (COTY), Greif (GEF), Exa Corp. (EXA), Sungy Mobile (GOMO), Guess (GES), Bally Technologies (BYI), Gordmans Stores (GMAN)

Companies that matched consensus earnings expectations include:
Williams-Sonoma (WSM), Jiayuan.com (DATE), DHT Holdings (DHT), Casella Waste (CWST), Tilly's (TLYS)

NEWSPAPERS/WEBSITES

Hackers targeted JPMorgan Chase (JPM), 'at least' four other banks, NY Times reports
FBI investigating whether Russia involved with JPMorgan (JPM) hacking, Bloomberg says
GSK (GSK), Shire (SHPG) rumored to be interested in Tekmira (TKMR), Daily Mail says
Samsung (SSNLF) hit by new allegations of child labor in China, FT reports
Samsung (SSNLF), Lenovo (LNVGY) China supplier rejects child labor claims, Reuters says
Judge denies Apple (AAPL) request to block sale of Samsung (SSNLF) devices, AP says
Tiffany (TIF) stock should continue higher, Barron's says

SYNDICATE

Castle Brands (ROX) files $30M mixed securities shelf
Gramercy Property Trust (GPT) files to sell 22.24M shares of common stock
Nordstrom (JWN) files to sell common stock, no amount given
Orient Paper (ONP) raises $2.5M in a registered direct offering
Tiffany (TIF) files automatic mixed securities shelf

• 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

• 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

• 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

• Obama orders U.S. airstrikes in Syria against Islamic State (Reuters)
• Obama Relying on Mideast Allies to Counter Islamic State (BBG)
• Scotland Nationalists Claim U.K. Oil in 40-Year Campaign (BBG)
• Scottish Polls Embolden Catalans Pushing Rajoy for Vote (BBG)
• Royal Bank of Scotland: RBS will leave Scotland if voters back independence (Guardian)
• Most Hedge-Fund Managers Are Overpaid, Unigestion Says (BBG)
• China Inflation Softens to Four-Month Low (WSJ)
• Australian Employers Add Record Jobs as Currency Jumps (BBG)... of which 87% were part-time
• Munger Hosts Groupies, Mocks Wall Street, Praises Buffett (BBG)
• RadioShack posts tenth straight quarterly loss, prepares bailout loan (Reuters, Bloomberg)
• Said loan is basically a pre-petition DIP: RadioShack Says It’s Seeking Ways to Boost Cash as Losses Mount (BBG)
• Manhattan’s Rent Gains Send Queens Leasing Deals Surging (BBG)
• Washington Trading Probe Broadens to Hedge Funds (WSJ)
• U.S. lawmakers embrace fight against Islamic State, some question Obama plan (Reuters)
• Lawmakers Seek to Smooth Banks' Path Through Bankruptcy (WSJ)

Overnight Media Digest

WSJ

* President Barack Obama authorized the start of U.S. air strikes in Syria and expanded a month-long bombing campaign in Iraq to "degrade and ultimately destroy" Islamic militants who recently beheaded two Americans. (http://on.wsj.com/1p97F8h)

* The National Football League said Wednesday night that it is appointing former FBI Director Robert Mueller to conduct an investigation into the league's "pursuit and handling of evidence" in the Ray Rice domestic violence incident. The investigation will be supervised by New York Giants owner John Mara and Pittsburgh Steelers President Art Rooney. (http://on.wsj.com/1tLZCWt)

* Investigators are examining communications between research firm Height Securities and several hedge funds, opening a new front in an insider-trading probe focused on the firm's 2013 investor alert about a change in health-care policy. (http://on.wsj.com/1tzuV2V)

* Fifteen years ago, Ana Patricia Botín was pushed out of her senior job at Banco Santander SA by the bank's chairman, who also happened to be her father. On Wednesday Botín's Shakespearean career came full circle, with her being named chairman after her father's death. (http://on.wsj.com/1qEWKIJ)

* A bipartisan bill approved by a congressional committee to amend the U.S. bankruptcy code underscores a post-crisis conundrum: Big banks must demonstrate they can be dismantled in bankruptcy, but experts and some lawmakers say the current code is inadequate to handle the failure of a major financial firm. (http://on.wsj.com/1nMQObQ)

* The Securities and Exchange Commission is stepping up its scrutiny of corporate executives who sell shares in their own companies, announcing a raft of cases Wednesday against insiders for allegedly breaking rules on disclosing stockholdings and trades. (http://on.wsj.com/Zhuwte)

* Twitter Inc plans to raise as much as $1.5 billion in the social-media company's first sale of debt to support its growing business. The San Francisco company said it is offering convertible bonds in two chunks of $650 million, according to a securities filing on Wednesday. (http://on.wsj.com/1lV9Wsx)

* Sony Corp said it reached an agreement for its planned Web-based TV service to carry MTV, Nickelodeon and 20 other Viacom Inc channels and offer access to streaming Viacom programming on mobile devices. (http://on.wsj.com/1qHHdIm)

* JDS Uniphase Corp said it plans to split into two publicly traded companies, separating its optical components business from its networking operations. The fiber-optic communications company plans to spin off its communications and commercial optical products segment into a separate company by the third quarter of next year. (http://on.wsj.com/Zhvdmn)

FT

Banco Santander SA names Ana Patricia as its chairperson. Patricia succeeds her father Emilio Botin, who died of a heart attack on Tuesday night.

Ferrari's chairman for 23 years, Luca Cordero di Montezemolo, said he will quit as chairman, a move that was expected after being questioned by Fiat SpA over Formula One team's poor performance. Sergio Marchionne, chief executive of Fiat, will replace him.

Veronique Laury has been appointed as the chief executive of Kingfisher Plc. Laury, who currently runs the company's France division, replaces Ian Cheshire.

U.S. Bitcoin company Coinbase said it plans to start its consumer service across a large part of the eurozone.

JPMorgan Chase & Co is set to propose in its next paper a better framework to deal with failing clearing houses, calling the current method brittle and opaque.

NYT

* Making global e-commerce available to Chinese shoppers is a key aim of Alibaba Group Holding Ltd, and the strategy could help put a dent in American trade deficits. (http://nyti.ms/1pRl0lK)

* On Wednesday, Dollar General Corp said it was going hostile and taking its $9.1 billion offer for Family Dollar directly to shareholders after being rebuffed. The move further complicates Family Dollar's agreed-upon deal, announced in July, to sell itself to Dollar Tree for $8.5 billion. (http://nyti.ms/1tLYXEs)

* Syncora Guarantee Inc, Detroit's most vociferous adversary in bankruptcy, is close to a breakthrough settlement with the city, but before it can close the deal it must resolve a related dispute with two big banks, Bank of America Corp and UBS AG. The bankruptcy judge, Steven Rhodes, has adjourned a trial in the case until Monday. If Syncora cannot reach an agreement with the banks by then, it will face a breakdown of its whole deal with Detroit. (http://nyti.ms/1qMCVOc)

* Coinbase is taking its bitcoin services to Europe in a move that could help expand the virtual currency's reach. The company, one of the most popular digital wallet providers, said on Wednesday that it was expanding to 13 European countries, including France, Italy and the Netherlands, by allowing those with authorized European bank accounts to buy and sell bitcoins in exchange for euros. (http://nyti.ms/1nMkYMr)

* The Coleman Company, a manufacturer of camping and other outdoor equipment, has agreed to take more than 20,000 of its inflatable rubber tubes off the shelves at Wal-Mart Stores Inc . Two dozen consumers reported skin irritation from the 36-inch-wide black Sevylor River Racer tubes, intended for one person to sit in and float in the water. (http://nyti.ms/1wgIgiA)

* France's economic recovery will be much more fragile this year than originally thought, and the government will not be able to meet targets for reducing the deficit for at least another two years in the face of sputtering growth, the French Finance Ministry announced on Wednesday. (http://nyti.ms/1ung3Hz)

Canada

THE GLOBE AND MAIL

** Much of the local television programming that Canadians cherish won't survive without a new revenue stream for broadcasters, BCE Inc is warning, while pleading with the federal TV regulator to be measured in its efforts to boost consumer choice. On Wednesday, a phalanx of executives from Bell Media, which is owned by BCE, spent more than five hours arguing the company's case on a range of issues at Let's Talk TV, a regulatory hearing exploring a sprawling list of proposals that could dramatically reshape the TV landscape in Canada. (http://bit.ly/1nNp07d)

** The Canadian government will announce on Thursday that it is lowering Employment Insurance premiums in an effort to boost hiring at a time of sluggish job growth - the first of an expected series of tax cuts as Ottawa moves out of deficit and prepares to face voters in next year's federal election. (http://bit.ly/1rXzrwf)

** Toronto Mayor Rob Ford has been admitted to hospital with a tumour, throwing his high-profile re-election efforts into question with the months-long campaign in its final stretch. (http://bit.ly/1qMm9Pn)

NATIONAL POST

** With the recent spate of disappointing Canadian economic data, momentum is growing for a new round of bearish bets on the Canadian dollar's fall, particularly as the American economy - and with it, the U.S. dollar - gains greater strength relative to Canada. (http://bit.ly/1whUE4Q)

** After being expelled from Germany and banned from the United States, United Kingdom and Australia, Canadian Muslim preacher Bilal Philips was detained in the Philippines on Wednesday for "inciting and recruiting people to conduct terrorist activities." (http://bit.ly/1squAlj)

** Parks Canada's underwater archaeologists return to the Arctic on Thursday with their diving equipment, hoping to reach out and touch the wreck of a Franklin expedition ship before the ice moves in. The divers urgently want to answer some pressing questions before summer ends and ice prevents further exploration. (http://bit.ly/YzqSed)

China

CHINA SECURITIES JOURNAL

- Stocks traded on China's Nasdaq-style ChiNext market for more than three years will be included as components for the country's blue-chip stock indexes, such as CSI300 Index and SSEF 500 Index for the first time from December, exchange officials said.

- China's agriculture-related insurance should deepen its connections with the credit and futures products, said Chen Wenhui, vice chairman of the China Insurance Regulatory Commission (CIRC), at the 2014 China agriculture insurance seminar on Wednesday.

- A working group of the State Council plans to loosen its control over more than 200 items of administrative examination and approval procedures for new business and investment mode this year, said the group's spokesperson during the State Council's press conference on Wednesday.

SECURITIES TIMES

- Ebay Inc has established cooperation with CreditEase company from China to launch its wealth management product Shangtongdai, a product resembling Alibaba's Yuebao platform, the newspapers reported on Thursday.

CHINA DAILY

- China will maintain its current pace of reform, and putting its large market under better governance will be the country's best contribution to the rest of the world, the paper said in an editorial.

Britain

The Times

BRITISH NOMINEE SECURES ECONOMIC POST IN EU COMMISSION

United Kingdom Prime Minister David Cameron's hopes of securing a better deal from the European Union were given a boost today when Britain won control of the key Brussels job of regulating the financial sector. Jean Claude Juncker, named Lord Hill of Oareford as Commissioner for Financial Stability, Financial Services and Capital Markets Union.(thetim.es/WVMe3P)

FINANCIAL TURMOIL HITS SCOTLAND OVER REFERENDUM

Scotland was facing financial turmoil yesterday, with banks and insurers reporting a growing number of customers worried about their cash as leading business figures warned against the consequences of separation. (thetim.es/1p8U7cZ)

The Guardian

SCOTTISH INDEPENDENCE: NEW POLL GIVES NO VOTE SIX-POINT LEAD

A new opinion poll on Scottish independence has found the no vote back in the lead at 53 percent of voters, suggesting the sudden surge in backing for independence has subsided. (bit.ly/Yy0QYG)

FRANCE TO MISS EU BUDGET DEFICIT TARGET

France has admitted it will overshoot the European Union's 3 percent budget deficit target this year, putting the eurozone's second-biggest economy on a collision course with Brussels. (bit.ly/1Bt7DRm)

The Telegraph

PENSIONS FIRM STANDARD LIFE THREATENS TRANSFER TO ENGLAND IF SCOTLAND VOTES FOR INDEPENDENCE

Standard Life PLC, the pensions and insurance company, has said it is planning to shift large parts of its business to England in the event of a "Yes" vote in next week's Scottish referendum. (bit.ly/1sisJil)

ALL EU COUNTRIES WANT BRITAIN TO STAY - EXCEPT FRANCE

In a new poll published on Wednesday by the German Marshall Fund think tank, people in the major EU countries were asked for the first time whether Britain should leave the bloc. In all countries surveyed, except France, more people said the EU should accommodate Britain's concerns about the bloc rather than see it leave. (bit.ly/1smLgKe)

Sky News

SCOTTISH VOTE: BP SAYS NO TO INDEPENDENCE

BP Plc has weighed into the Scottish independence debate by declaring its support for the "integrity of the United Kingdom." (bit.ly/1xKG4oi)

SANTANDER CHAIRMAN EMILIO BOTIN DIES AGED 79

The death from a heart attack of Santander's Chairman Emilio Botin - known as "El Presidente" - has raised the prospect of his eldest daughter Ana Botin being handed the role. Ana Botin, who currently heads Santander UK, is understood to be in line to succeed her father. (bit.ly/1wgwrZX)

The Independent

FOREIGN INVESTORS DESERT BRITISH ECONOMY AMID FEARS OF YES VOTE

Major global investors have been pulling billions of pounds out of the British economy due to fears that Scotland could vote Yes to independence. (ind.pn/YvEjfh)

VERONIQUE LAURY TO BECOME FIFTH FTSE 100 FEMALE BOSS AS HEAD OF B&Q OWNER KINGFISHER

The FTSE 100 is to get its fifth female boss after B&Q owner Kingfisher PLC today replaced Chief Executive Officer Ian Cheshire with the head of its struggling French DIY business, Veronique Laury. (ind.pn/ZgHiIu)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Jobless claims for week of September 6 at 8:30--consensus 300K
Treasury budget for August at 14:00--consensus deficit $130.0B

ANALYST RESEARCH

Upgrades

Atlas Air (AAWW) upgraded to Outperform from Market Perform at FBR Capital
CRH Plc. (CRH) upgraded to Buy from Neutral at BofA/Merrill
JDSU (JDSU) upgraded to Outperform from Sector Perform at RBC Capital
Jones Lang LaSalle (JLL) upgraded to Overweight from Neutral at JPMorgan
Omnicare (OCR) upgraded to Buy from Neutral at Goldman
SeaWorld (SEAS) upgraded to Outperform from Neutral at Macquarie
Tenaris (TS) upgraded to Overweight from Equal Weight at Morgan Stanley
Vera Bradley (VRA) upgraded to Outperform from Neutral at RW Baird
WESCO (WCC) upgraded to Overweight from Neutral at JPMorgan
Wet Seal (WTSL) upgraded to Buy from Neutral at B. Riley

Downgrades

E2open (EOPN) downgraded to Market Perform from Outperform at Northland
E2open (EOPN) downgraded to Sector Perform from Outperform at Pacific Crest
Express Scripts (ESRX) downgraded to Neutral from Buy at Goldman
Macy's (M) downgraded to Neutral from Buy at Sterne Agee
Veolia Environment (VE) downgraded to Sector Perform from Outperform at RBC Capital

Initiations

Aerohive Networks (HIVE) initiated with an Outperform at Macquarie
Amphenol (APH) initiated with an Equal Weight at Morgan Stanley
Athlon Energy (ATHL) initiated with a Buy at Deutsche Bank
CBOE Holdings (CBOE) initiated with a Buy at Deutsche Bank
CME Group (CME) initiated with a Buy at Deutsche Bank
Callon Petroleum (CPE) initiated with an Outperform at Cowen
Edwards Lifesciences (EW) initiated with a Buy at Sterne Agee
Energen (EGN) initiated with a Buy at Deutsche Bank
Globus Medical (GMED) initiated with an Outperform at JMP Securities
Goodrich Petroleum (GDP) initiated with an Outperform at Cowen
Healthcare Realty Trust (HR) initiated with a Neutral at Mizuho
Healthcare Trust (HTA) initiated with a Neutral at Mizuho
IntercontinentalExchange (ICE) initiated with a Hold at Deutsche Bank
JD.com (JD) initiated with a Buy at Brean Capital
Live Nation (LYV) initiated with a Buy at Jefferies
Medtronic (MDT) initiated with a Neutral at Sterne Agee
Midstates Petroleum (MPO) initiated with a Market Perform at Cowen
NASDAQ (NDAQ) initiated with a Hold at Deutsche Bank
Nationstar (NSM) initiated with an Equal Weight at Barclays
Nuverra Environmental (NES) initiated with a Buy at Stifel
Ocwen Financial (OCN) resumed with an Equal Weight at Barclays
Orion Engineered (OEC) initiated with a Neutral at Macquarie
Palo Alto (PANW) initiated with a Buy at Roth Capital
Petrobras (PBR) initiated with an Outperform at Cowen
PharMerica (PMC) initiated with a Neutral at Goldman
RSP Permian (RSPP) initiated with a Hold at Deutsche Bank
Sensata (ST) initiated with an Equal Weight at Morgan Stanley
Stage Stores (SSI) initiated with a Neutral at Credit Suisse
Synergy Resources (SYRG) initiated with an Outperform at Cowen
TE Connectivity (TEL) initiated with an Overweight at Morgan Stanley
Twitter (TWTR) initiated with a Buy at Canaccord
Walter Investment (WAC) initiated with an Underweight at Barclays
Yandex (YNDX) initiated with a Buy at Canaccord

COMPANY NEWS

Twitter (TWTR) said it will offer $1.3B in convertible notes
JDSU (JDSU) said it will separate into two publicly traded companies
RBS (RBS) confirmed re-domicile plans ahead of Scottish referendum vote
T-Mobile (TMUS) extended 'Wi-Fi Un-leashed' with Gogo (GOGO) partnership
FDA approved weight management drug Contrave (TKPYY, OREX)
Starboard Value said Darden (DRI) has not fully complied with Florida court’s order

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
lululemon (LULU), Men's Wearhouse (MW), Sigma Designs (SIGM), Restoration Hardware (RH), Five Below (FIVE)

Companies that missed consensus earnings expectations include:
First Marblehead (FMD), Wet Seal (WTSL), LifeVantage (LFVN)

Companies that matched consensus earnings expectations include:
Pike Electric (PIKE)

NEWSPAPERS/WEBSITES

RadioShack (RSH) loan being prepped by UBS (UBS), Standard General, Bloomberg reports
Apple (AAPL) consumers in China unable to buy new iPhones this month, Reuters reports
Time Warner (TWX) not planning HBO IPO, says took 21st Century Fox's (FOXA) offer "seriously," NY Post reports
Deal.com says Energy XXI (EXXI) hires adviser for GOM sale, Bloomberg reports
Muddy Waters founder says Alibaba (BABA) could defraud investors, NY Times reports
Lloyds (LYG), RBS (RBS) to relocate to England if Scots vote yes, Bloomberg says
Starbucks (SBUX) to sell single-origin coffees in supermarkets, WSJ reports
Spirit Airlines (SAVE) looks expensive, Barron's says

SYNDICATE

Hilton (HLT) files to sell 90M in common stock for holders
Identiv Group (inve) files to sell common stock
PrivateBancorp (PVTB) 1.3M share Block Trade,  price range $30.07-$30.28
Twitter (TWTR) to offer $1.3B in convertible notes

Did someone finally inform the SEC that Bernie Madoff's business model has been adopted by every central bank in the "developed world?" Whatever the reason for today's record SEC award, which almost certainly has to do with HFT, a topic which this blog first brought to light back in 2009 when nobody had a clue what algo/high frequency trading is, congratulations to the lucky winner (unless of course it has to do with someone spilling the beans on US tax evaders in Swiss banks), and our condolences to the banks, because now that one can comfortably retire by informing the regulators of the pervasive crime that takes place within the US financial system on a daily basis, suddenly every disgruntled person laid off by the US banking sector is the next potential $30 million aware recipient.

From the SEC:

The Securities and Exchange Commission today announced an expected award of more than $30 million to a whistleblower who provided key original information that led to a successful SEC enforcement action.

The award will be the largest made by the SEC’s whistleblower program to date and the fourth award to a whistleblower living in a foreign country, demonstrating the program’s international reach.

“This whistleblower came to us with information about an ongoing fraud that would have been very difficult to detect,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “This record-breaking award sends a strong message about our commitment to whistleblowers and the value they bring to law enforcement.”

Sean McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award of more than $30 million shows the international breadth of our whistleblower program as we effectively utilize valuable tips from anyone, anywhere to bring wrongdoers to justice.  Whistleblowers from all over the world should feel similarly incentivized to come forward with credible information about potential violations of the U.S. securities laws.”

The SEC’s whistleblower program rewards high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1 million.  Whistleblower awards can range from 10 percent to 30 percent of the money collected in a case.  The money paid to whistleblowers comes from an investor protection fund established by Congress at no cost to taxpayers or harmed investors.  The fund is financed through monetary sanctions paid by securities law violators to the SEC.  Money is not taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  The previous high for an SEC award to a whistleblower was $14 million, which was announced in October 2013.  

The SEC awarded its first whistleblower under the program following its inception in fiscal year 2012.  The program awarded four more whistleblowers in FY 2013, and has awarded nine whistleblowers in FY 2014.

“We’re pleased with the consistent yearly growth in the number of award recipients since the program’s inception,” Mr. McKessy said.