Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Just yesterday, I wrote a post about how a South Carolina construction worker was fined $525 and lost his job for not paying $0.89 for a drink refill while working at the Ralph H. Johnson VA Medical Center in downtown Charleston. The point was to emphasize how the law comes down with a devastating vengeance when an average citizen commits a minor crime, yet allows the super rich to loot and pillage with zero repercussions. There is now a systemic two-tier justice system operating in these United States, and the result will unquestionably be tyranny if the trend continues unabated.

The latest example of a lowly citizen being subject to a disproportionate use of the law, is Jon Daniel of Peoria, Illinois. Jon was behind a parody Twitter account that mocked Peoria mayor Jim Ardis, and his biggest mistake was not making it clear that it was a parody. As a result, Twitter had already suspended the account weeks ago. Problem solved, right? Wrong.

The tough guy mayor was so offended that a plebe would dare criticize his royal highness that he ordered a police raid on the home of Jon Daniel and his roommates. Peoria native, Justin Glawe wrote an excellent article on the subject for Vice. He writes:

Jon Daniel woke up on Thursday morning to a news crew in his living room, which was a welcome change from the company he had on Tuesday night, when the Peoria, Illinois, police came crashing through the door. The officers tore the 28-year-old’s home apart, seizing electronics and taking several of his roommates in for questioning; one woman who lived there spent three hours in an interrogation room. All for a parody Twitter account.

 

Yes, the cops raided Daniel’s home because they wanted to find out who was behind @peoriamayor, an account that had been shut down weeks ago by Twitter.When it was active, Daniel used it to portray Jim Ardis, the mayor of Peoria, as a weed-smoking, stripper-loving, Midwestern answer to Rob Ford. The account never had more than 50 followers, and Twitter had killed it because it wasn’t clearly marked as a parody. It was a joke, a lark—but it brought the police to Daniel’s door. The cops even took Daniel and one of his housemates in for in-depth questioning—they showed up at their jobs, cuffed them, and confiscated their phones—because of a bunch of Twitter jokes.

 

So the police raid on Daniel’s house wasn’t an isolated incident; it was just another case of the cops acting shady—and naturally, many in this town are raising serious questions and concerns over the use of taxpayer resources and manpower to find out who ran @peoriamayor.

Fortunately, this story does have a silver lining. Daniel’s original Twitter account was actually pretty unsuccessful, with only 50 followers by the time it was shut down. Mayor Jim Ardis should’ve just left well enough alone, but he couldn’t do that, and as a result of all the attention this story has received in the blogosphere, new parody accounts have emerged. The most successful one is @NotPeoriaMayor and the avatar is Jim Ardis with a Hitler mustache. See below:

The best part is this account already has 7x the followers of the other one.

Lesson Learned: Don’t fuck with the Internet.

Full Vice article here.

The LA Times also covered the story, here.

• Ukraine Accord Nears Collapse as Biden Meets Kiev Leaders (BBG)
• Novartis reshapes business via deals with GSK and Lilly (Reuters)
• Moscow Bankers See Fees Slide 67% as Ukraine Crisis Grows (BBG)
• Why ECB's QE will be Ukraine's fault: Draghi Gauges Ukraine Effect as ECB Tackles Low Inflation (BBG)
• As Phone Subsidies Fade, Apple Could Be Hurt (WSJ)
• Amazon Sales Take a Hit in States With Online Tax (BBG)
• Ford Speeds Up Succession Plan: Mark Fields, Auto Maker's No. 2, Seen Replacing Alan Mulally as CEO Ahead of Schedule (WSJ)
• U.S. force in Afghanistan may be cut to less than 10,000 troops (Reuters)
• IBM End to Buyback Splurge Pressures CEO to Boost Revenue (BBG)
• Netflix Calls Out AT&T for Subpar Streaming Performance (BBG)
• GPIF Shakes Up Committee With Three Abe Panel Members (BBG)
• First sign of South Korea ferry disaster was call from a frightened boy (Reuters)

Overnight Media Digest

WSJ

* Activist investor William Ackman and Valeant Pharmaceuticals International Inc are seeking to acquire Allergan Inc, according to a filing on Monday with the Securities and Exchange Commission. The deal, if successful, would create a behemoth in the global eye-care and skin-care drug industries. Each company has a stock-market capitalization of more than $40 billion. (http://r.reuters.com/was68v)

* Ford Motor Co Chief Executive Alan Mulally will leave the company earlier than expected after a more than seven-year run in which he oversaw a significant expansion of the U.S. automaker, people familiar with the matter said. Mulally's successor will be Mark Fields, a Ford veteran who survived management turmoil in the years before Mulally's 2006 arrival. (http://r.reuters.com/vas68v)

* Facebook Inc is planning a mobile-ad network that will allow the company to tap its vast reservoir of data about users to help marketers target ads on other services. The network, which has been in the works for years, is set to be announced at Facebook's F8 conference at the end of the month.(http://r.reuters.com/tas68v)

* A Texas group sued the Federal Aviation Administration in federal court to challenge the agency's order to stop using drones in the group's searches for missing people, the latest round in an intensifying battle over regulation of the sector. (http://r.reuters.com/xas68v)

* For years, equities had taken a back seat to the bigger and often more-profitable business of buying and selling fixed-income securities and commodities. But as those units are squeezed by new regulation and uncooperative markets, banks are putting more muscle behind catering to the trading needs of equity investors. (http://r.reuters.com/zas68v)

* Tuesday Morning Corp and its former chief executive settled a discrimination lawsuit that alleged she was fired after developing breast cancer. Kathleen Mason, the head of the home-furnishings closeout retailer, was ousted in June 2012 after a 12-year run during which the company's stock fell nearly 60 percent. (http://r.reuters.com/ces68v)

* U.S. wireless carriers are making unexpectedly fast progress moving their customers away from subsidized phones, a shift that could put further pressure on sales of expensive devices like Apple Inc's iPhone. (http://r.reuters.com/des68v)

* Netflix Inc will raise the price of its streaming service for new members by a dollar or two a month, it said on Monday. It also said that it now has more than 34 million paid subscribers in the U.S. (http://r.reuters.com/ges68v)

FT

Fears of a conflict between pro-Kiev and secessionist forces were stoked after Russia's foreign minister vowed to put an end to the unrest in eastern Ukraine on Monday.

U.S. shares in Britain's AstraZeneca jumped on Monday after media reports revealed that Pfizer had made a tentative $100 billion takeover approach.

The Bank of England will oversee an ethical hacking programme of 20 major banks and other financial institutions in the UK to test the resilience of their computer systems.

Britain's Barclays, one of the world's biggest commodities traders, is looking to exit parts of its metals, agricultural and energy business in a move expected to be announced this week.

Microsoft said on Monday it had completed the steps necessary to finalise the purchase of Nokia's devices and services business though it made a few changes to the original terms of the 5.4 billion euro deal agreed last year.

Listed property firms in the UK are selling riskier assets and consolidating their borrowings as demand from overseas investors push property prices higher.

NYT

* Ford Motor Co has picked Mark Fields, its chief operating officer, to succeed Alan R. Mulally as the next chief executive of the company, according to a person with knowledge of the move. The selection of Fields would hasten the retirement of Mulally, who has said previously that he would stay as chief executive of Ford through the end of this year. (http://r.reuters.com/zes68v)

* Activist investor William A. Ackman, among the brashest men on Wall Street, made perhaps the boldest move yet for an activist. By teaming up with Valeant Pharmaceuticals International Inc, a big health care company, and offering to buy Allergan Inc, the maker of Botox, for roughly $50 billion. (http://r.reuters.com/bus68v)

* Investment banks, which rushed into the new territory of physical commodities starting at the turn of the century, are now beating a retreat. The latest bank expected to make an exit is Barclays Plc, which plans to announce on Tuesday that it will get out of large parts of its commodities business, according to a person briefed on the British bank's plans. (http://r.reuters.com/fus68v)

* Netflix Inc on Monday voiced strong opposition to Comcast Corp's planned $45 billion takeover of Time Warner Cable Inc, even while confirming that it was raising subscription prices. (http://r.reuters.com/gus68v)

* The U.S. Supreme Court on Monday seemed inclined to offer at least modest help to Argentina's creditors. The issue before the justices was in some ways a minor one, and they will soon decide whether to hear a second and more significant case arising from Argentina's 2001 default on billions of dollars of debt. (http://r.reuters.com/hus68v)

Canada

THE GLOBE AND MAIL

* Herb Gray, a former deputy prime minister and one of Canada's longest-serving parliamentarians, died on Monday at the age of 82. (http://r.reuters.com/gat68v)

* Air Canada has suspended two employees seen in a video dropping passengers' carry-on baggage into a bin several metres below at Toronto's Pearson International Airport. (http://r.reuters.com/jat68v)

Reports in the business section:

* Activist investor Bill Ackman is teaming up with Canada-based drug maker Valeant Pharmaceuticals International Inc to make a multi-billion dollar bid for California eye and skin care company Allergan Inc. (http://r.reuters.com/mat68v)

NATIONAL POST

* The Canadian Prime Minister's Office coughed up C$4.1 million ($3.7 million) in severance and separation pay over the first seven years of Stephen Harper's tenure for 196 departing PMO employees, according to government documents. (http://r.reuters.com/gut68v)

* With Victoria set to ban virtually all forms of public smoking, city councillors in the British Columbia capital are mulling the creation of small patches of neutral ground in which the region's 30,000 or so smokers could "kill themselves in peace" without breaking the law. (http://r.reuters.com/kut68v)

FINANCIAL POST

* Retreat and cut your losses, or carry on fighting. Those are the choices facing TransCanada Corp after the United States government's non-decision to put the Keystone XL pipeline on hold, yet again, possibly until next year, perhaps indefinitely. (http://r.reuters.com/dut68v)

* Rogers Communications Inc's new Chief Executive Guy Laurence still won't go into detail on his strategy to reboot growth at the company, but he is now hinting that it will hinge on getting all of the company's telecom and media assets to work better together. (http://r.reuters.com/put68v)

China

CHINA SECURITIES JOURNAL

- The China Banking Regulatory Commission (CBRC) has launched a research process into the regulation of Peer-to-Peer (P2P) credit channel to achieve better risk management, capital pooling is to be forbidden.

- As of the first quarter of 2014, the 1,917 funds run by 81 fund management companies have lost a sum of 65.8 billion yuan ($10.57 billion), according to data pooled by TX Investment Consulting Co. Ltd, a fund research company.

SHANGHAI SECURITIES NEWS

- The draft version of China's Environment Protection Law has been submitted to the Standing Committee of the National People's Congress, sources said, with more regulation to fight against air pollution and breakthrough in information disclosure mechanism to be expected.

CHINA DAILY

- More police armed with handguns are being deployed nationwide to conduct regular patrols on the streets amid rising concerns over public security, the Ministry of Public Security said on Monday. "The presence of armed police will enable immediate responses to emergencies and effectively combat violent crimes," said Yan Zhengbin, deputy director of the ministry's public security management bureau.

SHANGHAI DAILY

- A draft version of China's Criminal Law has been submitted to the top legislature, aiming to clearly define that eating endangered animals, or buying them for that or any other purpose, is illegal, sources said.

PEOPLE'S DAILY

- China's cabinet is going to authorise 7 supervision teams to 14 local governments to facilitate supporting policies for the development of small- and medium-sized enterprises.

Britain

The Telegraph

ASTRAZENECA BRINGS IN WALL STREET 'DEFENDERS' AMID PFIZER BID SPECULATION Goldman Sachs and Morgan Stanley are understood to have been hired by AstraZeneca amid speculation the drug maker could receive a new approach from Pfizer.

FORMULA ONE PROFITS STUCK IN THE SLOW LANE Profits of the motor racing series controlled by private equity firm CVC fell by $137 million last year, driven by accelerating payments under a new deal with the sport's 11 teams.

The Times

LET HOUSEHOLDS SHARE 250 MLN STG ENERGY WINDFALL, BIG SIX TOLD

Britain's six big energy companies have been urged to hand back at least 245 million pounds to consumers after it emerged that they will spend less than expected on a household insulation scheme.

36 BLN STG REBUILDING SCHEMES TO BEGIN

More than 200 projects to rebuild Britain by improving the roads and rail network, broadband coverage and flood defences will begin this year, David Cameron and George Osborne will reveal on Tuesday.

The Guardian

SCOTTISH INDEPENDENCE: GORDON BROWN WARNS OF PENSIONS 'TIMEBOMB' Ex-prime minister enters increasingly tight battle over independence as 'yes' campaign gains momentum.

BARCLAYS TO SELL ITS COMMODITIES TRADING TO FOCUS ON BANKING ARM The announcement comes before bosses face a storm of protests at the bank's annual general meeting.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
FHFA house price index for February at 9:00--consensus up 0.5% for the month
Existing home sales for March at 10:00--consensus down 1% to 4.56M rate
Richmond Fed manufacturing index for April at 10:00--consensus 2

ANALYST RESEARCH

Upgrades

AstraZeneca (AZN) upgraded to Buy from Neutral at Citigroup
athenahealth (ATHN) upgraded to Buy from Neutral at SunTrust
Barrick Gold (ABX) upgraded to Buy from Neutral at Goldman
FX Energy (FXEN) upgraded to Outperform from In-Line at Imperial Capital
Facebook (FB) upgraded to Outperform from Neutral at Credit Suisse
Fidelity Southern (LION) upgraded to Outperform from Market Perform at Keefe Bruyette
Fiesta Restaurant (FRGI) upgraded to Strong Buy from Outperform at Raymond James
First Financial (FFIN) upgraded to Neutral from Underperform at Macquarie
Home Depot (HD) upgraded to Outperform from Market Perform at BMO Capital
Intuit (INTU) upgraded to Equal Weight from Underweight at Evercore
KT Corporation (KT) upgraded to Outperform from Neutral at Macquarie
Lennox (LII) upgraded to Buy from Neutral at MKM Partners
Main Street (MAIN) upgraded to Outperform from Market Perform at Raymond James
Modine Manufacturing (MOD) upgraded to Outperform from Neutral at RW Baird
National Bank of Greece (NBG) upgraded to Neutral from Underperform at BofA/Merrill
Netflix (NFLX) upgraded to Buy from Hold at Cantor
Netflix (NFLX) upgraded to Outperform from Market Perform at Raymond James
Norwegian Cruise Line (NCLH) upgraded to Buy from Neutral at Goldman
Ruth's Hospitality (RUTH) upgraded to Outperform from Market Perform at Raymond James
Sinopec (SNP) upgraded to Neutral from Underperform at BofA/Merrill
Summit Midstream (SMLP) upgraded to Buy from Neutral at Goldman

Downgrades

CommonWealth REIT (CWH) downgraded to Sell from Hold at Stifel
Del Frisco's (DFRG) downgraded to Market Perform from Outperform at Raymond James
Deutsche Bank (DB) downgraded to Neutral from Buy at UBS
Fidelity & Guaranty Life (FGL) downgraded to Neutral from Outperform at Credit Suisse
QEP Resources (QEP) downgraded to Equalweight from Overweight at Barclays
Wisconsin Energy (WEC) downgraded to Fair Value from Buy at CRT Capital
Zillow (Z) downgraded to Fair Value from Buy at CRT Capital
Zions Bancorp (ZION) downgraded to Equal Weight from Overweight at Evercore

Initiations

2U (TWOU) initiated with a Buy at Goldman
Aerohive Networks (HIVE) initiated with a Buy at Goldman
Aerohive Networks (HIVE) initiated with an Overweight at Piper Jaffray
Akorn (AKRX) initiated with a Buy at Jefferies
Anacor (ANAC) initiated with a Buy at Jefferies
Buenaventura (BVN) initiated with a Neutral at Goldman
Everyday Health (EVDY) initiated with a Buy at Stifel
First Solar (FSLR) initiated with a Buy at Brean Capital
Franco-Nevada (FNV) initiated with a Neutral at Goldman
GSV Capital (GSVC) initiated with a Buy at Roth Capital
GW Pharmaceuticals (GWPH) initiated with an Overweight at Morgan Stanley
Glori Energy (GLRI) initiated with an Outperform at RW Baird
Immersion (IMMR) initiated with a Buy at B. Riley
Magna (MGA) initiated with a Neutral at UBS
Perrigo (PRGO) initiated with a Buy at Jefferies
Salix (SLXP) initiated with a Buy at Jefferies
SunEdison (SUNE) initiated with a Hold at Brean Capital
SunPower (SPWR) initiated with a Buy at Brean Capital
Supernus (SUPN) initiated with a Hold at Jefferies
Synaptics (SYNA) initiated with a Buy at Sterne Agee
Varonis (VRNS) initiated with an Outperform at Imperial Capital
XenoPort (XNPT) initiated with a Buy at Jefferies

COMPANY NEWS

Eli Lilly (LLY) said it will acquire Novartis Animal Health (NVS) for $5.4B in all-cash transaction
Novartis (NVS) said it will divest Vaccines business to GSK (GSK) for $7.1B and said it will acquire GSK's oncology products for $14.5B
Novartis (NVS), GSK Consumer Healthcare (GSK) formed a joint venture
Valeant (VRX) said in a filing that it intends to propose merger with Allergan (AGN); Allergan said it will evaluate any offer, if received, from Valeant and Pershing Square
Netflix (NFLX) said it opposes Comcast (CMCSA)-Time Warner Cable (TWC) deal
Netflix (NFLX) said it sees adding $1-$2 per month for new subscribers
Manchester United (MANU) said David Moyes has left as manager

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
BNY Mellon (BK), Potlatch (PCH), Regions Financial (RF), Carlisle (CSL), Signature Bank (SBNY), TAL Education (XRS), Western Alliance (WAL), Great Southern Bancorp (GSBC), GulfMark Offshore (GLF), Helix Energy (HLX), Rush Enterprises (RUSHA), First Defiance Financial (FDEF), Celanese (CE), Rent-A-Center (RCII), Customers Bancorp (CUBI), Cadence Design (CDNS), Matthews (MATW), Hexcel (HXL), Bank of Hawaii (BOH), Rambus (RMBS), PLX Technology (PLXT), Waste Connections (WCN), Banner Corp. (BANR), Netflix (NFLX), Exactech (EXAC)

Companies that missed consensus earnings expectations include:
Teck Resources (TCK), Brown & Brown (BRO), Healthstream (HSTM), Werner (WERN), Glacier Bancorp (GBCI), Zions Bancorp (ZION), Wilshire Bancorp (WIBC), Umpqua Holdings (UMPQ), Forward Air (FWRD)

Companies that matched consensus earnings expectations include:
Mercantile Bank (MBWM), BancorpSouth (BXS)

NEWSPAPERS/WEBSITES

Ackman, Valeant (VRX) team up on Allergan (AGN) bid, WSJ reports
Barclays (BCS) to exit parts of commodities business, NY Times says
Citigroup (C) looks to sell about 50 branches in California, Bloomberg reports
Investment banks (MS, C, USB, WFC, JPM, GS, BAC) battling over stock trading, WSJ reports
Companies with cloud businesses (GOOG, AMZN, RAX) worried about Aereo case, Re/code says
GlaxoSmithKline (GSK) says Novartis (NVS) deal could lead to more disposals, Reuters reports
Novartis (NVS) CEO says bolt-on acquisitions still possible, Reuters reports

SYNDICATE

Agios Pharmaceuticals (AGIO) files to sell 2M shares of common stock
Allison Transmission (ALSN) files to sell 25M shares for holders
FireEye (FEYE) files to sell 13.3M shares of common stock for holders
ePlus (PLUS) files to sell 1.79M shares of common for holders

• Ukraine forces kill up to five rebels, Putin warns of consequences (Reuters)
• Obama to Russia: More sanctions are 'teed up' (AP)
• Vienna Banks Bemoan Russia Sanctions Testing Cold War Neutrality (BBG)
• GE’s $57 Billion Cash Overseas Said to Fuel Alstom Deal (BBG)
• GM posts lower first-quarter profit after recall costs (Reuters)
• Apple Stock Split Removes Obstacle to Inclusion in Dow (BBG)
• U.S. regulators to propose new net neutrality rules in May (Reuters)
• U.K. Resurrecting Loans for 95% of Value Seen as Risky (BBG)
• Obama reaffirms commitment to Japan on tour of Asia allies (Reuters)
• Bank Cutting Commodities Trade Severs Link With Equities (BBG)
• The left’s secret club (Politico)
• Russian social media CEO quits, flees country (AP)

Overnight Media Digest

WSJ

* The Food and Drug Administration plans Thursday to impose the first federal regulations on electronic cigarettes, eventually banning sales of the popular devices to anyone under 18 and requiring makers to gain FDA approval for their products. (http://r.reuters.com/ruh78v)

* Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes. The Federal Communications Commission plans to put forth its rules on Thursday. The proposal marks the FCC's third attempt at enforcing "net neutrality" - the concept that all Internet traffic should be treated equally. (http://r.reuters.com/sah78v)

* Primark, a clothing chain whose formula of fashionable looks at rock-bottom prices has proved a hit with UK shoppers, said Wednesday it plans to open its first U.S. store late next year in the former Boston home of the original Filene's Department Store. (http://r.reuters.com/meh78v)

* New cars and trucks-including some of the season's hottest sellers-are stacked up outside U.S. factories as auto makers and railroads struggle to overcome delays brought on by winter weather and the rise of production outside the Midwest. The logjams have left dealers short of some popular models, such as the Ford Explorer sport-utility vehicle and Toyota RAV4, ahead of the biggest months of the year for new-car sales. (http://r.reuters.com/buh78v)

* Zynga Inc said founder Mark Pincus is giving up his operating role at the videogame company, one of several management changes announced along with first-quarter results that included a 36 percent decline in revenue. Pincus has decided to give up his role as chief product officer. (http://r.reuters.com/heh78v)

* Apple Inc in a nod to restive shareholders, added $30 billion to its stock-buyback plan, raised its dividend about 8 percent and declared an unusually large 7-for-1 stock split as it reported strong iPhone sales that defied expectations of a slowdown. (http://r.reuters.com/vah78v)

* A surge in prices helped drive down sales of newly built homes in March, the latest indication that the housing market is struggling to regain traction. Sales of new single-family homes fell 14.5 percent from February to a seasonally adjusted annual rate of 384,000, the Commerce Department said Wednesday. That was the lowest annual rate since last July, though the pace for January and February was revised higher. (http://r.reuters.com/weh78v)

* Facebook Inc proved its recent advertising windfalls were no fluke, nearly tripling profit on a 72 percent increase in revenue in its first quarter, surpassing Wall Street expectations. Chief financial officer David Ebersman is stepping down from the company two years after he orchestrated one of the largest, and tumultuous, IPOs in history. (http://r.reuters.com/xah78v)

* Chobani Inc reached a deal for a $750 million investment from private equity firm TPG, as the maker of Greek yogurt prepares for a potential initial public offering and expands into other products such as cooking ingredients and desserts. (http://r.reuters.com/zah78v)

* A federal bankruptcy watchdog overseeing TelexFree's Chapter 11 case found compelling evidence of fraud, dishonesty and gross mismanagement and asked a judge to order the appointment of a trustee to take control of the company. TelexFree has been accused of illegally operating a $1 billion pyramid scheme targeting Brazilian and Dominican immigrants. Most of the company's leadership and several of its promoters have been charged with civil fraud by the Securities and Exchange Commission. (http://r.reuters.com/rah78v)

FT

Warren Buffett, whose Berkshire Hathaway Inc is the Coca-Cola Co's largest shareholder, said the U.S. beverage company's equity pay plan was "excessive" but abstained from voting on the scheme on Wednesday.

Mark Pincus, founder of troubled games maker Zynga Inc , is stepping out of day-to-day work at the company as it seeks to remake itself.

A surprise 17 percent jump in iPhone unit sales, driven by China, helped Apple Inc beat revenue expectations for the first quarter, lifting shares by 8 percent.

Facebook Inc, the world's largest social network, posted first-quarter results that sent its stock up 4 percent in after-hours trading, quelling recent doubts over its ability to make money on mobile.

Boeing Co raised its full-year earnings expectations and posted results ahead of analysts' expectations for the first three months of the year, as Chief Executive Jim McNerney said the aerospace and defence group was braced for "significant and sustained growth".

NYT

* New York's financial regulator filed a lawsuit against a subprime auto lender, accusing it of violating certain provisions of the Dodd-Frank financial overhaul act. The complaint filed in Federal District Court in Manhattan, contends that Long Island-based Condor Capital Corporation siphoned millions of dollars away from the accounts of unwitting borrowers. (http://r.reuters.com/nah78v)

* The principle that all Internet content should be treated equally as it flows through cables and pipes to consumers looks all but dead. The Federal Communications Commission said on Wednesday that it would propose new rules that allow companies like Walt Disney Co, Google Inc or Netflix Inc to pay Internet service providers like Comcast Corp and Verizon Communications Inc for special, faster lanes to send video and other content to their customers. (http://r.reuters.com/qah78v)

* Going further than any state so far, Vermont on Wednesday passed a law requiring the labeling of foods that contain genetically engineered ingredients. Though the move came in a tiny state far from the nation's population centers, proponents of such labeling immediately hailed the legislative approval as a significant victory. (http://r.reuters.com/ceh78v)

* The Justice Department's criminal division, which oversees some of the biggest investigations into Wall Street and corporate crime, is adding to its ranks. Marshall L. Miller, a longtime federal prosecutor in Brooklyn, was named to the criminal division's No. 2 spot. (http://r.reuters.com/keh78v)

* Amazon.com Inc will stream a selection of HBO series, mini-series and original movies as part of its Prime subscription service, the latest alliance between technology and entertainment companies trying to capture viewers who are moving online. (http://r.reuters.com/neh78v)

* Mark Pincus, the founder of Zynga Inc, is stepping back from the once-hot social gaming company as its new leader seeks a turnaround. Zynga said that Pincus decided to give up all operational responsibilities at the company, though he will remain its chairman and largest shareholder. (http://r.reuters.com/qeh78v)

Canada

THE GLOBE AND MAIL

* Canada's Conservative government is launching a national discussion of proposed new pension plans that share the investment risk between employers and employees. (http://r.reuters.com/byj78v)

* No damage was reported after a 6.7 magnitude earthquake hit off the northern coast of Vancouver Island on Wednesday night. The U.S. Geological Survey reported that the epicentre was about 94 kilometres south of Port Hardy and struck at a depth of 11 kilometres. (http://r.reuters.com/nyj78v)

Reports in the business section:

* McDonald's Canada has suspended further use of the temporary foreign worker program after criticism that several franchises at the fast-food chain were favouring foreign workers over seemingly qualified Canadian applicants. (http://r.reuters.com/gyj78v)

NATIONAL POST

* As Philippe Couillard and his Liberal cabinet were sworn in Wednesday at the legislature in Quebec City, the prominent place given the Canadian flag and the lieutenant governor - the Queen's representative - made it plain that the Parti Quebecois era was over. (http://r.reuters.com/syj78v)

* Canada, which has long blocked discussion of Arctic issues at NATO, is under increasing pressure from allies to drop its resistance and come up with a co-ordinated response to Russia's aggressive militarization in the Far North. (http://r.reuters.com/tyj78v)

FINANCIAL POST

* Almost never has an activist investor expressed such love for a company's management and strategy as Bill Ackman's cross-border crush on Valeant Pharmaceuticals International Inc . (http://r.reuters.com/mak78v)

* Crescent Point Energy Corp has signed an agreement to buy CanEra Energy Corp, a privately held oil and gas producer in southeast Saskatchewan, in a deal valued at C$1.1 billion, including debt. (http://r.reuters.com/zak78v)

China

CHINA SECURITIES JOURNAL

- Another 10 companies have announced plans to list on China's equity markets, bringing the total number of firms planning listing to 75.

- Total profit of state-owned companies reached 311 billion yuan ($49.86 billion) in the first quarter of this year, up 3.4 percent from a year earlier, the State-owned Assets Supervision and Administration Commission said.

SHANGHAI SECURITIES NEWS

- The China Securities Regulatory Commission said it would perform random checks on companies seeking initial public offering to ensure that the information disclosed in their prospectus are accurate.

- China State Construction Engineering Corp's 2013 net profit rose 29.6 percent to 20.4 billion yuan ($3.27 billion) and said it expects newly signed contracts in 2014 to reach more than 1.2 trillion yuan.

CHINA DAILY

- There will be an oversupply of office space in China in the coming three years, with second-tier cities being hit first, industry analysts said.

- China's household consumption may rise to as high as 50 percent of gross domestic product by 2020, compared with 35 percent today, findings from Nielson Holdings BV showed. The increase will create investment opportunities in second-and third-tier cities.

SHANGHAI DAILY

- China is on track to meet mandatory targets on cutting pollution and improving energy efficiency by 2015, a state planning official said, after the program had fallen behind due to strong economic growth in 2011 and 2012.

Britain

The Telegraph

INDEPENDENT SCOTLAND HAS PARALLELS WITH ICELAND, WARNS S&P

Scotland could end up with a banking system much like that of Iceland on the eve of the financial crisis if it votes for independence, according to a warning from one of the world's leading rating agencies. (http://link.reuters.com/dyg78v)

REPORT INTO CO-OP BANK FAILURE TO BLAME GOVERNANCE

The Co-op Bank's near collapse will be blamed on the struggling lender's poor governance, in a report to be published next week by a former senior civil servant. (http://link.reuters.com/fyg78v)

The Guardian

BARCLAYS FACES ROUGH RIDE AT AGM OVER TAX HAVENS AND BANKERS' BONUSES

Barclays is braced for a stormy annual shareholder meeting on Thursday with protesters pledging to question its role in tax havens, funding of coal mines and the 9 billion pounds ($15.10 billion) of bonuses paid out to its investment bankers since the financial crisis. (http://link.reuters.com/hyg78v)

ROYAL MAIL IN SPOTLIGHT AGAIN AS MPS QUESTION BANKERS WHO HANDLED SELL-OFF

The Royal Mail privatisation will be the subject of fresh scrutiny by Members of Parliament next week when bankers from Goldman Sachs and UBS - which handled the sell-off of the 500-year-old institution - are summoned to give evidence to a high-profile parliamentary committee. (http://link.reuters.com/gyg78v)

PRIMARK TO ENTER U.S. MARKET WITH BOSTON STORE

Primark, the fashion store that brought the 3 pound jumper dress to the British shopper, is to open in the United States as it attempts to become a global chain. (http://link.reuters.com/qyg78v)

The Independent

PATISSERIE VALERIE OWNER HOPES TO RAISE 33 MLN STG IN LONDON FLOAT

Serial entrepreneur Luke Johnson, the owner of Patisserie Valerie, is returning to the stock market with the planned 170 million pound flotation of the cafe chain on London's junior AIM exchange. (http://link.reuters.com/jyg78v)

SPORTS DIRECT GOES ON THE ATTACK AFTER MIKE ASHLEY BONUS VOTE

Mike Ashley's Sports Direct has launched an attack against its institutional investors, warning of "further uncertainty" after they refused to back a multimillion-pound payout to the billionaire founder. (http://link.reuters.com/pyg78v)

DRAX TUMBLES OVER GOVERNMENT U-TURN ON SUBSIDY TERMS

Shares in Drax Group fell 10 percent after the government said a new subsidy scheme would only apply to limited part of its plan to convert much of its giant coal-fired plant into biomass burners. (http://link.reuters.com/myg78v) ($1 = 0.5960 British pounds)

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Aixtron (AIXG) upgraded to Neutral from Underweight at HSBC
Apple (AAPL) upgraded to Buy from Outperform at CLSA
Asbury Automotive (ABG) upgraded to Buy from Hold at BB&T
Ciena (CIEN) upgraded to Buy from Neutral at UBS
Cullen/Frost (CFR) upgraded to Market Perform from Underperform at Keefe Bruyette
Ericsson (ERIC) upgraded to Outperform from Market Perform at BMO Capital
First Midwest (FMBI) upgraded to Buy from Neutral at Guggenheim
Goodyear Tire (GT) upgraded to Conviction Buy from Buy at Goldman
HMS Holdings (HMSY) upgraded to Outperform from Perform at Oppenheimer
Hawaiian Holdings (HA) upgraded to Neutral from Underperform at BofA/Merrill
M&T Bank (MTB) upgraded to Buy from Hold at Deutsche Bank
MicroStrategy (MSTR) upgraded to Buy from Hold at Deutsche Bank
NuStar Energy (NS) upgraded to Buy from Hold at Stifel
O'Reilly Automotive (ORLY) upgraded to Strong Buy from Market Perform at Raymond James
Republic Airways (RJET) upgraded to Neutral from Underperform at BofA/Merrill
Southwest Bancorp (OKSB) upgraded to Outperform from Market Perform at Raymond James
TriQuint (TQNT) upgraded to Outperform from Market Perform at Northland Securities

Downgrades

AT&T (T) downgraded to Long-Term Buy from Buy at Hilliard Lyons
Canadian National (CNI) downgraded to Market Perform from Outperform at BMO Capital
Core Laboratories (CLB) downgraded to Underweight from Overweight at Morgan Stanley
First Industrial Realty (FR) downgraded to Hold from Buy at KeyBanc
Randgold Resources (GOLD) downgraded to Neutral from Overweight at HSBC
Southern Copper (SCCO) downgraded to Neutral from Buy at BofA/Merrill
Susser Holdings (SUSS) downgraded to Neutral from Outperform at Macquarie
Xilinx (XLNX) downgraded to Neutral from Outperform at Credit Suisse

Initiations

NXP Semiconductors (NXPI) initiated with an Outperform at BMO Capital
Nord Anglia (NORD) initiated with an Overweight at JPMorgan
Xerox (XRX) initiated with a Positive at Susquehanna
YY Inc. (YY) initiated with a Buy at Maxim

COMPANY NEWS

Apple (AAPL) announced several capital actions, including a $30B increase in its share repurchase authorization, an 8% increase in its quarterly dividend to $3.29 per share and a 7-for-1 stock split that will take effect in June. Apple's quarterly iPhone sales totaled 43.7M, topping estimates, while iPad sales disappointed
Facebook (FB) said CFO David Ebersman will step down and will be succeeded by David Wehner, currently the company's VP, Corporate Finance and Business Planning. Facebook announced that its mobile daily active users totaled 609M at the end of Q1, and the company's revenue from advertising grew 82% to $2.27B, with 59% of its ad revenue coming from mobile. The company also said Messenger, Instagram both reached 200M monthly active users in Q1
Qualcomm (QCOM) disclosed receipt of a "Wells Notice" from the SEC that the SEC has made a preliminary determination recommending the filing of enforcement action against the company related to anti-bribery violations
Zynga (ZNGA) announced that founder Mark Pincus will move on from his role as Chief Product Officer but continue to serve as chairman of the company's board
Ericsson (ERC) announced the division of business unit networks into two units
Men's Wearhouse (MW) extended its tender offer for Jos. A. Bank (JOSB) to May 7
Herbalife (HLF) said ABC report raises questions Ackman should answer

EARNINGS

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

Wyndham (WYN), NorthWestern (NWE), Alamos Gold (AGI), Cabot Microelectronics (CCMP), Starwood Hotels (HOT), Helmerich & Payne (HP), Diamond Offshore (DO), Potash (POT), Cash America (CSH), Stanley Black & Decker (SWK), Aetna (AET), Time Warner Cable (TWC), VASCO Data Security (VDSI), Logitech (LOGI), NXP Semiconductors (NXPI), Northfield Bancorp (NFBK), TriState Capital (TSC), O'Reilly Automotive (ORLY), Teradyne (TER), Orrstown Financial (ORRF), PTC Inc. (PTC), Sun Bancorp (SNBC), Oceaneering (OII), Brookline Bancorp (BRKL), First Interstate (FIBK), Service Corp. (SCI), Eagle Bancorp (EGBN), CVB Financial (CVBF), Equifax (EFX), MKS Instruments (MKSI), Infinera (INFN), Callaway Golf (ELY), CoStar Group (CSGP), West Corp. (WSTC), Financial Institutions (FISI), Selective Insurance (SIGI), Lam Research (LRCX), Fortinet (FTNT), Apple (AAPL), Aspen Insurance (AHL), Tyler Technologies (TYL), Allied World (AWH), Flowserve (FLS), Exponent (EXPO), Hudson Technologies (HDSN), Ferro (FOE), E-Trade (ETFC), Assurant (AIZ), Symetra Financial (SYA), Everest Re (RE), Polycom (PLCM), Citrix (CTXS), Robert Half (RHI), F5 Networks (FFIV), TriQuint (TQNT), Allegiant Travel (ALGT), LSI Corp. (LSI), On Assignment (ASGN), Align Technology (ALGN), Oritani Financial (ORIT), Facebook (FB), Qualcomm (QCOM)

Companies that missed consensus earnings expectations include:

Invacare (IVC), PulteGroup (PHM), Dunkin' Brands (DNKN), Colfax (CFX), WESCO (WCC), Patterson-UTI Energy (PTEN), Safeguard Scientifics (SFE), CARBO Ceramics (CRR), Novartis (NVS), Old Second Bancorp (OSBC), The Bancorp (TBBK), TAL International (TAL), LPL Financial (LPLA), NewMarket (NEU), Morningstar (MORN), Graco (GGG), Kaiser Aluminum (KALU), Churchill Downs (CHDN), Susquehanna (SUSQ), Ingram Micro (IM), Xilinx (XLNX), Electro Scientific (ESIO), Cheesecake Factory (CAKE), Varian Medical (VAR), IPC The Hospitalist Co. (IPCM), Interface (TILE), ResMed (RMD), Famous Dave's (DAVE), Safeway (SWY), Fusion-io (FIO), SunCoke Energy (SXC), Monarch Casino (MCRI), Chicago Bridge & Iron (CBI), Texas Capital (TCBI), Greenhill & Co. (GHL), Datawatch (DWCH), United Stationers (USTR), Tractor Supply (TSCO), Stryker (SYK), Rocky Brands (rcky)

Companies that matched consensus earnings expectations include:

Eli Lilly (LLY), Sequans (SQNS), Core Laboratories (CLB), Blackhawk (HAWK), Innovative Solutions (ISSC), Angie's List (ANGI), Zynga (ZNGA), ServiceNow (NOW)

NEWSPAPERS/WEBSITES

FDA to impose first federal regulations on e-cigarettes (MO, LO, PM, RAI, VGR), WSJ reports
Publicis (PUBGY) sees U.K. tax approval in Omnicom (OMC) deal, WSJ reports
General Electric (GE) in talks to buy Alstom, Bloomberg says
Alstom says 'not aware' of any potential bid by General Electric (GE), WSJ reports
Buffett (BRK.A): Moving oil by rail safely major industry concern, Reuters reports
General Motors (GM) says it has shipped 'thousands' of replacement ignition switches, Reuters says
Nokia (NOK) to not include India phone plant in Microsoft (MSFT) deal, Bloomberg says

SYNDICATE

Agios Pharmaceuticals (AGIO) 2M share Secondary priced at $44.00
Hannon Armstrong (HASI) 5M share Secondary priced at $13.00
New Source Energy (NSLP) 3M share Secondary priced at $23.25
Parametric Sound (HEAR) files to sell $45M in common stock
Sarepta (SRPT) 2.65M share Secondary priced at $38.00
SunCoke Energy Partners (SXCP) files to sell 2.8M common units
Tsakos Energy (TNP) 11M share Spot Secondary; price range $7.25-$7.50
Yingli Green Energy (YGE) files to sell 25M ADSs

Claiming $100 million in North American weather-related costs, and $310 million losses due to the devaluation of the Venezuelan currency, Ford Motor Company missed revenues and earnings quite significantly:

• *FORD 1Q AUTOMOTIVE REV. $33.9B, EST. $34.2B
• *FORD 1Q ADJ. EPS 25C, EST. 31C

Furthermore, Ford lost market share (for 0.6 percentage points to 15.3%) and expected operating cash flow in 2014 to be substantially lower than 2013. Ford is trading down 3% in the pre-market.

As Bloomberg reports,

Ford Motor Co., beset by higher warranty costs and bad weather, earned a first-quarter net income of $989 million, down 39 percent from a year ago and less han analysts’ estimates.

 

Ford reported net income of 24 cents a share, down from $1.6 billion, or 40 cents, a year earlier. Excluding one-time  costs, the profit was 25 cents a share, trailing the 31-cent  average estimate of 15 analysts surveyed by Bloomberg.

 

Ford attributed the miss to an extra $400 million in warranty and recall expenses, $100 million in North American weather-related costs and $310 million to account for the devaluation in the Venezuelan currency. Ford said it will now lose more money in South America this year than the $34 million it lost last year, which is a change from its previous guidance.

But there's always the next quarter... it seems they didn't quite kitchen sink it.

Bonds, Gold, and JPY are bid this morning as US equity futures are fading fast. The Dow and S&P futures are now back below pre-AAPL/FB levels and Nasdaq futures falling fast. Gold is back above $1300 (up over $30 from yesterday's pre-Putin lows). Treasuries, led by the long-end, are rallying as safe-haven bids appear across the whole complex. 30Y yields are down to 3.53 - the lowest since July. JPY is bid once again as USDJPY tests back to the crucial 102 level.

First, a quick bulletin summary of the key overnight events:

• Treasuries rise, with 10Y and 30Y leading weekly gains amid increasing tensions in Ukraine; Russia’s military began new exercises on the countries’ border as S&P cut Russia’s sovereign rating to BBB-.
• Russia’s central bank unexpectedly raised its one-week auction rate to 7.5% from 7%; U.S. secretary of state Kerry warned Putin he’s running out of time to comply with an accord to ease tensions
• Obama said the U.S. and its allies “will follow through” on additional sanctions if there is no progress; plans to call European leaders today to discuss options
• Merkel spokesman Steffen Seibert said Russia’s actions in eastern Ukraine are “absolutely disappointing”
• Israel said it will suspend Middle East peace talks because of the Palestinian Authority’s reconciliation agreement with Hamas; Obama said no Middle East deal expected in next six months
• EU officials are preparing to pit the bloc’s banks against the toughest simulated recession that they have ever faced in a stress test, three people briefed on the matter said
• U.K. retail sales rose 0.1% in March, more than expected, as warm weather boosted spending on spring clothing
• A drunk passenger on board a Virgin Australia Holdings Ltd. plane destined for Bali, Indonesia, caused a hijack scare after trying to enter the cockpit
• Sovereign yields mostly lower. Asian stocks ex-Japan mostly lower; Nikkei +0.4%, Shanghai -1.00%. European equity markets fall; U.S. stock futures slightly higher. WTI crude and copper lower, gold gains

Dow and S&P futures are well below pre-AAPL/FB levels...

As Gold breaks above $1300

As the 30Y yield drops to new 9-month lows...

Critical for the open is USDJPY holds 102...

The remainder of the overnight events courtesy of RanSquawk:

Asian Headlines

Japanese National CPI and the forward-looking Tokyo CPI missed expectations despite the Y/Y coming in at its highest level since 1992, with some analysts noting that inflation above 3.0% could lead to further easing by the BoJ at their meeting next week . Whilst Asian stocks closed mostly lower (Hang Seng Index -1.5%, Shanghai Composite -1.0%), but the Nikkei 225 (+0.17%) was somewhat shielded from losses amid a series of positive earning reports.

Ukraine/Russia

The Russian Micex traded lower at the start of the session after Russia was cut by S&P from BBB to BBB-. However, losses were trimmed after Russian foreign minister Lavrov said Russia will push to de-escalate the Ukraine conflict despite accusing US Secretary of State Kerry of using a prosecutorial tone. This was later followed by reports of a Ukraine helicopter damaged after shot by a sniper and comments from Russian President Putin saying Russia should increase production of anti-missile systems.

EU & UK Headlines

Fitch affirmed Italy at BBB+; revised outlook to stable from negative. Separately, S&P affirmed France and the EFSF at AA; outlook stable. (BBG/RTRS)
Barclays preliminary pan-Euro agg month-end extensions for April: +0.09y (March +0.07y)
Barclays preliminary Sterling month-end extensions for April: +0.02y (March -0.02y)

US Headlines

Attention turns to further US earnings from Ford and AbbVie, with US PMIs and University of Michigan data to shed more light on US economic confidence, which was dampened this morning after Goldman Sachs slashed their GDP estimate for Q1 to just 1.0% from 1.4% prior saying they expect Q1 to be the lowest point of the year for growth, with substantial weather effects and inventory drag weighing on growth.
Barclays preliminary US Tsys month-end extensions for April:+0.08y (March +0.07y)

Equities

European equities started Friday's session on a lacklustre note (Eurostoxx 50 currently -0.69%) as overhanging fears of escalation in Ukraine kept riskier assets under pressure, taking the shine out of further M&A chatter for Shire and Tate & Lyle today.

FX

GBP strengthened as retail sales beat expectations, but the moves were relatively muted given the touted weather effect on the numbers. The JPY trades higher on the back of flight to quality, as markets looked beyond lower than expected CPI overnight. Note there are USD 2.5bln worth of option expiries in USD/JPY to roll off at 1000am NYcut (1500BST).

Commodities

WTI has been offered since the European open now touching Wednesdays lows with little support seen until USD 100.00/100.39. This follows on from a strong session yesterday after flared tension in Ukraine supported WTI. Reports emerging of Russian Military mobilization and Ukraine giving Russia a 48 hour deadline to "explain" their movements. Bank of America says that WTI price has decoupled from Brent and time-spreads. (BBG)

• Two-Thirds of Insurance Exchange Enrollees Paid Premiums (WSJ)
• Panic: Criminal Charges Against Banks Risk Sparking Crisis (BBG)
• Did the junk bubble pop: Junk Loans Pulled as Investors Say No After Fed Raises Concerns (BBG)
• CME mulls price fluctuation limits for gold, silver futures (Reuters)
• AT&T Has Approached DirecTV About Possible Acquisition (WSJ)
• NBA sets wheels turning for Clippers sale; Oprah in wings (Reuters)
• One way to fix prison overcrowding: Florida Jail Hit by Deadly Blast (WSJ)
• New Boeing jets hold key to more than half of future sales (Reuters)
• Sony slashes profit estimate by 70% (Guardian)
• Buffett Pressures Coca-Cola Over Executive Pay (WSJ)
• Two attackers among three killed in China bombing (Reuters)
• Ukraine's restive east slipping from government's grasp (Reuters)
• Hess, Mercuria Units Added to Brent Crude Price-Fixing Lawsuit (BBG)

Overnight Media Digest

WSJ

* AT&T has approached DirecTV about a possible acquisition of the satellite-TV firm, the latest sign of a possible shake-up in the television industry. A deal would likely be worth at least $40 billion, DirecTV's current market capitalization, a fraction of AT&T's $185 billion market capitalization. (http://r.reuters.com/qad98v)

* The Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month and it was starting to see a growth pickup in recent weeks after a harsh winter that hit the U.S. economy. (http://r.reuters.com/ded98v)

* The Coca-Cola Co likely will revise its executive-compensation plan before it goes into effect next year, bowing to pressure from billionaire investor Warren Buffet. The potential changes come as a surprise after voting shareholders approved Coke's plan last week-and Buffett declined to vote against it. (http://r.reuters.com/fed98v)

* U.S. prosecutors are threatening to use what bank executives consider a nuclear option by filing criminal charges against two large foreign banks. Officials led by the Justice Department, though, are still trying to find a way to defuse the most catastrophic possible outcome of filing criminal charges: driving the banks out of business entirely. (http://r.reuters.com/ged98v)

* Alstom Chairman and Chief Executive Patrick Kron defied France's government by plunging ahead with plans to sell the country's industrial jewels to U.S.-based General Electric . France's economy minister portrayed the move as an act of national betrayal. (http://r.reuters.com/ped98v)

* The Federal Aviation Administration granted Boeing Co's request that the new 777 jetliner to be approved without a lengthy full recertification. (http://r.reuters.com/ked98v)

* Anheuser-Busch InBev NV's union workers Wednesday ratified a five-year contract that calls for wage increases and no plant closings, officials with the International Brotherhood of Teamsters said in a statement posted on the union's website. The contract, which union officials said would add some $2 billion in wages and benefits, is retroactive to March 1. It was the first contract Anheuser-Busch negotiated since its 2008 hostile-bid acquisition by InBev NV. (http://r.reuters.com/hed98v)

* Online-storage startup Box is delaying its plans for an initial public offering after a sudden weakening in demand for technology stocks. Box's March 24 IPO filing made it eligible to list shares as early as April, but people close to the company said the offering may not happen until June, and no timing has been set. (http://r.reuters.com/ned98v)

FT

GlaxoSmithKline's Chief Executive Andrew Witty all but ruled out a white knight bid for rival drugmaker AstraZeneca on Wednesday by reiterating scepticism on big takeover deals in the sector.

Britain's Reckitt Benckiser, which makes Durex condoms and Nurofen, has ended talks to buy Merck's consumer healthcare unit, paving the way for a rival to land the business behind Coppertone sun tan lotion.

Media baron Richard Desmond is planning to sell British broadcaster Channel 5 for 450 million pounds ($759.85 million) to U.S.-based Viacom, in a move that will see him receive more than four times his initial investment.

Rio Tinto is taking Vale and BSG Resources to court, alleging the rival mining groups were part of a conspiracy to steal its rights to an African iron ore deposit worth billions of dollars.

Microsoft's Xbox One is going to be the first foreign games console to be sold in China, after a 14-year ban on the devices was lifted in January.

NYT

* With the Republican-led filibuster of a Senate proposal to raise the federal minimum wage to $10.10 on Wednesday, Democrats moved swiftly to frame the vote as an example of the gulf that exists between the two parties on matters of economic fairness and upward mobility. (http://r.reuters.com/xad98v)

* Facebook Inc announced on Wednesday that when its 1.3 billion users log in to other websites or mobile apps through their Facebook identities, they will be able to limit what they reveal to the site or app to just their email addresses and public profile information, like name and gender. (http://r.reuters.com/wad98v)

* A federal regulator confirmed on Wednesday that the country's biggest banks committed widespread errors in dealing with homeowners who faced foreclosures at the height of the mortgage crisis, but the findings are unlikely to put to rest questions from lawmakers and others about the extent of the problems. (http://r.reuters.com/zad98v)

* The Federal Reserve continued to retreat from its stimulus campaign on Wednesday, saying it was looking past the economic slowdown during an unusually cold winter because growth already was rebounding. (http://r.reuters.com/bed98v)

* The utility operator Exelon Corp agreed on Wednesday to buy Pepco Holdings Inc for $6.8 billion in a bid to strengthen its operations on the East Coast. Under the terms of the deal, Exelon will pay $27.25 a share in cash, nearly 20 percent above Pepco's closing share price on Tuesday. (http://r.reuters.com/ced98v)

* The Federal Communications Commission's chairman delivered a tough message to cable and broadband executives Wednesday, saying a lack of competition in their industry has hurt consumers. The chairman, Tom Wheeler, said that the FCC intended to address the problem by writing tough new rules to enforce so-called net neutrality, preventing big broadband and cable companies from blocking access to innovative new technologies and start-ups that might emerge as competitors. (http://r.reuters.com/jed98v)

Canada

THE GLOBE AND MAIL

** Two workers were killed and two others injured as gunfire broke out at the Western Forest Products mill in Nanaimo in British Columbia. Royal Canadian Mounted Police said a lone gunman, a 47-year-old former employee who was later arrested at the scene, entered the mill yard carrying a shotgun and started shooting in the parking lot. (http://r.reuters.com/mud98v)

** A second video of Toronto Mayor Rob Ford smoking what has been described as crack cocaine by a self-professed drug dealer was secretly filmed in his sister's basement early Saturday morning. Ford declined to respond to questions about the video, his lawyer said the mayor was going to take a break from election campaigning. (http://r.reuters.com/pud98v)

Reports in the business section:

** Peter Munk stepped down as the chairman of Barrick Gold Corp on Wednesday. He founded the company three decades ago and turned it into the world's biggest gold producer. "You can take, maybe, Munk out of Barrick. You can't take Barrick out of Munk," he said at the company's annual meeting of shareholders. (http://r.reuters.com/rud98v)

NATIONAL POST

** Rumors about Beverley McLachlin, Chief Justice of the Supreme Court of Canada, are being shared with journalists, alleging she lobbied against the appointment of Marc Nadon to the court. It is also being suggested she has told people the Harper government has caused more damage to the court as an institution than any government in Canadian history. (http://r.reuters.com/xud98v)

** Canada is stepping into the increasingly tense showdown between Kyiv and Moscow over the future of eastern Ukraine by taking over leadership of an Organization for Security and Cooperation in Europe's military observer mission in the central European country. (http://r.reuters.com/zud98v)

FINANCIAL POST

** The Canadian federal government is expected to release details soon about the shape and size of a co-operative securities regulator that so far has the support of only Ontario and British Columbia. (http://r.reuters.com/cyd98v)

** The federal government asks Canadian telecom companies for private customer information about 1.2 million times each year, documents released Tuesday by the federal privacy commissioner's office show. (http://r.reuters.com/dyd98v)

Britain

The Telegraph

RECKITT BENCKISER BOWS OUT OF RACE FOR MERCK'S CONSUMER HEALTH ARM

Reckitt Benckiser has said it is no longer in discussions about buying U.S. pharma group Merck's consumer health business, leaving Germany's Bayer as the leading contender for the $14 billion business. (http://link.reuters.com/gyc98v)

ABU DHABI AND SOROS GOT 'GOLDEN TICKET' IN ROYAL MAIL SALE

Abu Dhabi Investment Authority, billionaire investor George Soros and activist hedge fund Third Point were among the 16 investors given preferential treatment in the controversial Royal Mail privatisation. (http://link.reuters.com/zeb98v)

ARGOS TO OPEN STORES IN HOMEBASE

Argos is to open concessions in Homebase stores and will also roll out a collection of small convenience stores in London as the retailer ramps up its fight with Amazon. (http://link.reuters.com/cub98v)

The Guardian

MORRISONS CUTS PRICE OF 1,200 PRODUCTS IN BID TO WIN CUSTOMERS BACK

A supermarket price war will move a step closer on Thursday as struggling Morrisons slashes the price of more than 1,200 products in an attempt to regain customers lost to cheaper discount chains. (http://link.reuters.com/hyc98v)

GLAXOSMITHKLINE KEEPS DISTANCE FROM BID FOR RIVAL ASTRAZENECA

GlaxoSmithKline has distanced itself from a white-knight bid for rival British drugs maker AstraZeneca , which has received an unwanted 60 billion pound ($101.31 billion) takeover approach from Pfizer of the United States. (http://link.reuters.com/qyc98v)

The Times

SERCO ON BRINK AS ANDREW JENNER, FINANCE DIRECTOR, QUITS

The finance director of Serco has left his job in the wake of a disastrous profit warning as the struggling outsourcing group plots an emergency fundraising to shore up its ailing balance sheet. (http://link.reuters.com/nyc98v)

PARIS MAY TAKE STAKE IN ALSTOM TO STOP GE

France's Socialist government hinted it could take a stake in Alstom to thwart General Electric's 12.35 billion euro ($17.12 billion) bid for the French group's power division. (http://link.reuters.com/ryc98v)

CHANNEL 5 SOLD FOR 450 MLN BY DESMOND

Media baron Richard Desmond is set to complete the sale of Channel 5 to U.S. broadcaster Viacom, the owner of MTV, for up to 450 million pounds. (http://link.reuters.com/pyc98v)

PENSION TAX FEAR AFTER EU RULING

Britain's ability to limit damaging decisions made by eurozone countries was called into question as the European Union's highest court threw out a challenge to a financial transactions some fear could wipe billions from UK pension funds. (http://link.reuters.com/myc98v)

STANDARD LIFE SHRUGS OFF THE IMPACT OF PENSION CHANGES

The British government's shock changes to pensions announced in this year's budget, which mean that those retiring do not automatically have to take out an annuity, has resulted in the halving in sales of such investment products at Standard Life , one of the biggest providers. (http://link.reuters.com/kyc98v)

The Independent

SAGA CUSTOMERS SIGN UP AHEAD OF 2.2 BLN STG FLOAT

Saga has revealed that 700,000 customers have registered to take part in its stock market listing as it aims to raise around 550 million pounds. (http://link.reuters.com/tyc98v)

LADBROKES POISED TO CUT JOBS AFTER TAX HIKE

Ladbrokes has warned it will make job cuts and store closures after the British government's surprise tax hike for bookmakers. (http://link.reuters.com/vyc98v)

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Jobless claims for week of April 26 at 8:30--consensus 320K
Personal income for March at 8:30--consensus up 0.4% for the month
ISM manufacturing index for April at 10:00--consensus 54.3
Construction spending for March at 10:00--consensus up 0.6% for the month

ANALYST RESEARCH

Upgrades

Abercrombie & Fitch (ANF) upgraded to Buy from Hold at Jefferies
Barclays (BCS) upgraded to Buy from Neutral at UBS
Cavium (CAVM) upgraded to Neutral from Reduce at Nomura
Cengage Learning (CNGO) upgraded to Outperform from In-Line at Imperial Capital
Citrix (CTXS) upgraded to Buy from Sell at Berenberg
Exelon (EXC) upgraded to Buy from Hold at Deutsche Bank
Exelon (EXC) upgraded to Market Perform from Underperform at Wells Fargo
FARO Technologies (FARO) upgraded to Outperform from Neutral at RW Baird
Flushing Financial (FFIC) upgraded to Buy from Neutral at Guggenheim
ING Groep (ING) upgraded to Neutral from Underweight at HSBC
JetBlue (JBLU) upgraded to Overweight from Neutral at JPMorgan
KeyCorp (KEY) upgraded to Market Perform from Underperform at Bernstein
National CineMedia (NCMI) upgraded to Buy from Neutral at B. Riley
Pacific Biosciences (PACB) upgraded to Neutral from Underweight at JPMorgan
Quaker Chemical (KWR) upgraded to Overweight from Equal Weight at First Analysis
Regions Financial (RF) upgraded to Market Perform from Underperform at Bernstein
Rocket Fuel (FUEL) upgraded to Equal Weight from Underweight at Evercore
Synageva (GEVA) upgraded to Buy from Neutral at Janney Capital
Synchronoss (SNCR) upgraded to Strong Buy from Outperform at Raymond James
Synovus (SNV) upgraded to Equal Weight from Underweight at Morgan Stanley
U.S. Silica (SLCA) upgraded to Buy from Hold at Jefferies
Wright Medical (WMGI) upgraded to Strong Buy from Buy at Needham
Yelp (YELP) upgraded to Outperform from Neutral at Macquarie
Yelp (YELP) upgraded to Outperform from Sector Perform at RBC Capital
Yelp (YELP) upgraded to Overweight from Neutral at Piper Jaffray

Downgrades

CEVA (CEVA) downgraded to Hold from Buy at Wunderlich
CNO Financial (CNO) downgraded to Neutral from Buy at Goldman
Clean Harbors (CLH) downgraded to Neutral from Outperform at RW Baird
Coach (COH) downgraded to Underweight from Equal Weight at Morgan Stanley
EXCO Resources (XCO) downgraded to Underperform from Sector Perform at RBC Capital
Emulex (ELX) downgraded to Neutral from Overweight at Piper Jaffray
Essilor (ESLOY) downgraded to Neutral from Buy at Citigroup
GFI Group (GFIG) downgraded to Market Perform from Outperform at Keefe Bruyette
Pepco Holdings (POM) downgraded to Market Perform from Outperform at Wells Fargo
USA Compression (USAC) downgraded to Market Perform from Outperform at Wells Fargo

Initiations

Flowers Foods (FLO) initiated with an Outperform at Imperial Capital
Navient (NAVI) initiated with an Equal Weight at Evercore

COMPANY NEWS

EQT (EQT) said it will sell Jupiter gathering system to EQT Midstream Partners (EQM) for $1.18B. EQT also signed an asset exchange agreement with Range Resources (RRC) and announced a 1M share repurchase authorization
Weight Watchers (WTW) raised its FY14 earnings outlook to $1.45-$1.70 per share from $1.30-$1.60
Yelp (YELP), which gave a FY14 revenue outlook that topped current expectations, said Q1 cumulative reviews increased 46% to 57M
Chevron (CVX) raised its quarterly dividend to $1.07 per share from $1.00
Abercrombie & Fitch (ANF) nominated four independent directors to board, announced settlement agreement with Engaged Capital, under which Engaged agreed to withdraw its notice of nomination of directors for election
Aeropostale (ARO) said it will close 125 P.S. stores, cut 100 positions
Starwood Hotels (HOT) CFO Vasant Prabhu resigned to become CFO of NBCUniversal (CMCSA)

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Vical (VICL), Pacira Pharmaceuticals (PCRX), Swift Energy (SFY), Ball Corp. (BLL), Quanta Services (PWR), ExlService (EXLS), Calpine (CPN), CytRx (CYTR), Care.com (CRCM), Proto Labs (PRLB), Endo International (ENDP), Enterprise Products (EPD), Becton Dickinson (BDX), Cigna (CI), Orbotech (ORBK), Orion Marine (ORN), Republic Airways (RJET), Fleetmatics (FLTX), United Insurance (UIHC), Atwood Oceanics (ATW), La Jolla (LJPC), C&J Energy (CJES), Charles River Labs (CRL), Tesoro Logistics (TLLP), Tetra Tech (TTEK), Chesapeake Lodging (CHSP), Blackbaud (BLKB), Curtiss-Wright (CW), Lincoln National (LNC), Con-way (CNW), Digital River (DRIV), Glu Mobile (GLUU), Synageva (GEVA), Flextronics (FLEX), Amdocs (DOX), Williams (WMB), Weight Watchers (WTW), Atmel (ATML), Fidelity National (FNF), Shutterfly (SFLY), Intersil (ISIL), Cohu (COHU), Intrepid Potash (IPI), Accuray (ARAY), Western Digital (WDC), Manning & Napier (MN), First Bancorp (fbnc), Rovi (ROVI), Equinix (EQIX), Coherent (COHR), Cavium (CAVM), NCI, Inc. (NCIT), Hologic (HOLX), International Rectifier (IRF), Yelp (YELP), Green Dot (GDOT), Kratos Defense (KTOS), Whiting Petroleum (WLL), WebMD (WBMD), Roadrunner (RRTS), QuickLogic (QUIK)

Companies that missed consensus earnings expectations include:

Textron (TXT), Beazer Homes (BZH), Integra LifeSciences (IART), ACI Worldwide (ACIW), Genesee & Wyoming (GWR), Generac (GNRC), Heritage-Crystal Clean (HCCI), Buenaventura (BVN), Crocs (CROX), Xenith Bankshares (XBKS), SJW Corp. (SJW), American Railcar (ARII), Ashland (ASH), Terex (TEX), Orient-Express (OEH), Remy International (REMY), Hyster-Yale Materials (HY), North Valley Banc (NOVB), Stanley Furniture (STLY), Chemtura  (CHMT), California Water Service (CWT), Stamps.com (STMP), Amerisafe (AMSF), Energy XXI (EXXI), Alphatec (ATEC), Hornbeck Offshore (HOS), Comfort Systems USA (FIX), Cabot (CBT), Oiltanking Partners (OILT), TTM Technologies (TTMI), Oplink Communications (OPLK), ManTech (MANT), inTEST (INTT), Williams Partners (WPZ), MedAssets (MDAS), TESARO (TSRO), McGrath RentCorp (MGRC), MetLife (MET), Martin Midstream Partners (MMLP), JDSU (JDSU), OncoGenex (OGXI), Forrester (FORR), American Equity (AEL), Boyd Gaming (BYD), Silicon Graphics (SGI)

Companies that matched consensus earnings expectations include:

Iron Mountain (IRM), MEDNAX (MD), Key Energy (KEG), Kirby (KEX), MDU Resources (MDU), Pilgrim's Pride (PPC), Allegion (ALLE), Jack Henry (JKHY), Macquarie Infrastructure (MIC), United Online (UNTD), Kona Grill (KONA), Endologix (ELGX), Portfolio Recovery (PRAA), ANADIGICS (ANAD), Dyax (DYAX), Pacific Biosciences (PACB), Sensar (SCII)

NEWSPAPERS/WEBSITES

AT&T (T) approached DirecTV (DTV) about possible takeover, WSJ reports
Coca-Cola (KO) to amend executive pay after pressure from Buffett (BRK.A), WSJ says
Winters says Coca-Cola (KO) compensation plan 'excessive,' Bloomberg reports
Softbank (SFTBF) and Sprint (S) deal for T-Mobile (TMUS) not imminent, Re/code reports
Rio Tinto (RIO) sues Vale (VALE), Steinmetz over iron-ore concession, WSJ reports
Alibaba in talks with Alipay about regaining stake, NY Times reports
Merck (MRK), Sanofi (SNY) exploring sale of off-patent drug assets, Reuters says
Box's (BOX) IPO may be delayed until June or later, WSJ reports
Twitter (TWTR) still looks expensive, Barron's says

SYNDICATE

Alphatec (ATEC) files to sell 10.25M shares of common stock for holders
Apollo Commercial (ARI) files to sell 9M shares of common stock
AxoGen (AXGN) files to sell $35M shares of common stock
Burlington Stores (BURL) 12M share Secondary priced at $25.75
EQT Midstream Partners (EQM) files to sell 8.75M common units for limited partners
Forum Energy (FET) 10M share Secondary priced at $29.00
Sterling Construction (STRL) announces bought deal offering of 2.1M shares
Uranium Resources (URRE) files to sell 4.5M shares of common stock for holders

• Ukraine attacks rebel city, helicopter shot down (Reuters)
• Euro Unemployment Holds Near Record Amid Factory Gains (BBG)
• Yellen’s Fed Resigned to Diminished Growth Expectations (BBG)
• Junket Figure's Disappearance Shakes Macau's Gambling Industry (WSJ)
• China tried to undermine economic report showing its ascendancy (WSJ)
• Liquidity Trap Hitting AAA Bonds Has ATP CEO Sounding Alarm (BBG)
• AstraZeneca Snubs Pfizer Approach That U.K. Won’t Block (BBG)
• Missing Jet Recordings May Have Been 'Edited' (NBC)
• RBS turns corner as first-quarter profit trebles (Reuters)
• Japan household spending hits four-decade high, wages key to outlook (RTRS) while Real Incomes Drop 3.3% in March, 6th straight decline
• First Million-Dollar Drug Near After Prices Double on Dozens of Treatments (BBG)
• How Canada’s Flirtation with a China Oil Market Soured (BBG)
• Retirement Investors Flock Back to Stocks (WSJ)
• SEC probing hedge funds' bets on Herbalife (Reuters)
• White House study backs data-gathering (FT)

Overnight Media Digest

WSJ

* German Chancellor Angela Merkel will be carrying a clear message from Germany's business lobby when she meets President Barack Obama at the White House to discuss the Ukraine crisis: No more sanctions on Russia. (r.reuters.com/qaj98v)

* Pfizer Inc and AstraZeneca have resumed talks about a trans-Atlantic merger of the two drug giants, after Pfizer sweetened the terms of an earlier takeover offer for its British rival. (r.reuters.com/jaj98v)

* Retirement investors are putting more money into stocks than they have since markets were slammed by the financial crisis six years ago. Meanwhile, large investors such as pension funds, banks and insurance companies are showing less appetite for risk. Demand for shares of newly public companies has weakened, and utilities, considered safe when economic growth isn't robust, are the best-performing group this year. (r.reuters.com/vej98v)

* As Apple Inc and Samsung Electronics Co squabble in court over who copied whose phone features, the companies' grip over the smartphone industry is slipping. The two companies account for nearly all smartphone hardware profits. But they are losing market share to Chinese rivals with lower-priced phones, particularly in developing nations. (r.reuters.com/hej98v)

* Mark Fields is set to take over as chief executive of Ford Motor Co on July 1, and he'll face very different set of challenges than those the current boss, Alan Mulally, has tackled over the last eight years. (r.reuters.com/xej98v)

* The New York Stock Exchange agreed to settle allegations it broke rules designed to protect investors, the second such pact in less than two years as the top U.S. securities regulator tries to ratchet up the policing of stock markets. The Big Board, along with affiliated exchanges and a broker, agreed to pay $4.5 million to settle civil charges by the Securities and Exchange Commission that they "repeatedly" broke their own rules or failed to submit rules governing certain activities to the regulator. (r.reuters.com/jej98v)

* J. Crew is developing a new store format aimed at budget-conscious shoppers underscoring the difficulty apparel retailers have had in boosting sales without help from discounts. The new format is called J. Crew Mercantile and will feature merchandise and prices closer to what shoppers would find at J. Crew Factory, the retailer's outlet stores, than what is available in its full-line stores. (r.reuters.com/rej98v)

* Exxon Mobil Corp is pushing ahead with its plans to drill in Russia's Arctic seas - its biggest opportunity to discover untapped deposits of oil and gas - even though deteriorating relations between Moscow and Washington have increased the risks. (r.reuters.com/tej98v)

FT

U.S. drugmaker Pfizer Inc is planning to sweeten its 60 billion pound ($101.37 billion) takeover bid for AstraZeneca Plc hoping to increase pressure on its UK rival to enter talks to create the world's biggest pharmaceuticals company.

The U.S. government has said business leaders who attend the St. Petersburg International Economic Forum in May are sending "an inappropriate message, given Russia's behaviour" in Ukraine.

The two big U.S. credit card companies, Visa and MasterCard, have both warned about the impact of proposed legislation in Russia - a response to U.S. sanctions - that will increase the control of the Russian authorities over its payment systems.

Rolls-Royce Chief Executive John Rishton said he was "reasonably optimistic" about the sale of the company's energy business to Siemens going through, in a deal expected to raise at least 900 million pounds.

Britain's financial watchdog, the Financial Conduct Authority, has banned a former co-worker of UBS rogue trader Kweku Adoboli from working in the financial services industry.

NYT

* Seattle Mayor Ed Murray presented on Thursday what he described as an imperfect but workable plan to increase the city's minimum wage to $15 an hour, more than twice the federal minimum wage and one of the highest anywhere in the nation, through a series of complex and phased-in stages. (http://r.reuters.com/qej98v)

* The White House, hoping to move the national debate over privacy beyond the National Security Agency's surveillance activities to the practices of companies like Google and Facebook, released a long-anticipated report on Thursday that recommends developing government limits on how private companies make use of the torrent of information they gather from their customers online. (http://r.reuters.com/sej98v)

* Ares Management LP, a private equity and debt investing firm, is expected to have its debut on the New York Stock Exchange on Friday, becoming the seventh major private equity firm to tap the public markets. The initial public offering was priced conservatively Thursday evening, raising $345.7 million for Ares and a large shareholder, the Abu Dhabi Investment Authority. The shares priced at $19 each, below an expected range of $21 to $23, according to a person briefed on the matter. (http://r.reuters.com/zej98v)

* Merck & Co Inc, the big health care company, is close to a deal to sell its consumer unit to Bayer AG for about $14 billion, a person briefed on the matter said on Thursday. (http://r.reuters.com/buj98v)

* Three federal agencies and one billionaire hedge fund manager have placed Herbalife Ltd under the microscope, scrutinizing whether the diet-supplements company is a pyramid scheme. But Herbalife is not the only one under investigation. Some federal authorities are pursuing other inquiries that might expand the regulatory gaze from Herbalife to the traders who traffic in the company's stock. (http://r.reuters.com/cuj98v)

* The auction site eBay Inc has settled a federal antitrust case that accused it of having a secret deal with Intuit Inc not to try to hire each other's employees. (http://r.reuters.com/duj98v)

Canada

THE GLOBE AND MAIL

* Ontario's Liberal government is ramping up the province's deficit with a big-spending budget designed to either forestall an election or pay off at the polls in the event of a snap vote. (http://r.reuters.com/hak98v)

* Toronto Mayor Rob Ford, on a leave to seek professional treatment for his addiction issues, is facing a growing chorus of calls to resign from business leaders, political rivals and his council colleagues. (http://r.reuters.com/jak98v)

Reports in the business section:

* SNC-Lavalin Group Inc is selling its Alberta electricity transmission company AltaLink for C$3.2 billion to Warren Buffett's Berkshire Hathaway Inc, as it moves away from infrastructure investments and puts its resources into engineering and construction. (http://r.reuters.com/wak98v)

NATIONAL POST

* The Liberal minority government of Ontario has delivered a budget packed with new spending and tax hikes for high-income earners while allowing this year's deficit to balloon to C$12 billion, C$2 billion higher than predicted. (http://r.reuters.com/cek98v)

* Liberal Party of Canada Leader Justin Trudeau's credibility has again come under fire from a member of his own party, with new allegations that he is stacking the deck to help star candidates win local nomination battles. (http://r.reuters.com/fek98v)

FINANCIAL POST

* Canadian auto sales rose to record levels in April with Ford Motor Co narrowly outselling its rival Chrysler Canada Inc last month. Overall auto sales increased 4 percent year over year in Canada last month to 178,703 units, up 2 percent from the previous record set for April in 2008, according to figures collected by DesRosiers Automotive Consultants. (http://r.reuters.com/gek98v)

* Canadian engineering giant SNC-Lavalin Group Inc is selling its entire stake in Alberta electricity transmission company Altalink for about C$3.2 billion to Warren Buffett's Berkshire Hathaway Inc in a deal priced far beyond what the market had been expecting. (http://r.reuters.com/hek98v)

Britain

The Telegraph

PFIZER MULLS HIGHER BID FOR ASTRAZENECA

Pfizer Inc is mulling a bid in excess of 63 billion pounds ($106.44 billion) for its smaller British rival AstraZeneca Plc, according to reports. (http://link.reuters.com/ceh98v)

SCOTTISH 'YES' VOTE COULD IMPROVE UK CREDIT, SAYS MOODY'S

Britain could end up with a better credit rating if Scotland votes for independence, with a "yes" providing the catalyst for an upgrade of the remaining UK's debt, according to Moody's. (http://link.reuters.com/beh98v)

'DANGEROUS' TO IGNORE HOUSE PRICE BOOM, WARNS BOE DEPUTY

Surging house prices pose the single biggest threat to UK financial stability, the deputy governor of the Bank of England has warned. (http://link.reuters.com/deh98v)

The Guardian

ELECTORAL COMMISSION VOIDS CBI LISTING AS NO CAMPAIGNER IN SCOTLAND VOTE

The Electoral Commission has nullified the Confederation of British Industry's controversial registration as a no campaigner in the Scottish independence referendum, after ruling that the application was made by the wrong CBI official. (http://link.reuters.com/hah98v)

FAT FACE AND PIZZAEXPRESS UP FOR AUCTION AS FIRMS TEST BUYERS' APPETITES

Fat Face and PizzaExpress are the latest consumer brands to go under the hammer as private equity firms look to cash in on rising consumer confidence and buoyant financial markets. (http://link.reuters.com/feh98v)

The Times

ROLLS CONFIDENT OF RETURN TO GROWTH

Rolls-Royce insisted yesterday that it would not be knocked off course despite a surging pound and a 30 million pound charge to fix a product defect. (http://link.reuters.com/heh98v)

HENDERSON INVESTORS IN REVOLT OVER CHIEF'S PAY

This year's bout of shareholder revolts over pay appeared to escalate yesterday after Henderson Group was given a bruising in the wake of a 4.5 million pound annual payout for Andrew Formica, its chief executive. (http://link.reuters.com/jeh98v)

The Independent

POUND LEAPS AFTER SURGE IN MANUFACTURING OUTPUT

The latest stunning evidence of a UK manufacturing revival sent the pound surging to a five-year high yesterday as the City upped its bets on early interest rate rises. (http://link.reuters.com/meh98v)

HERITAGE OIL FOUNDER SELLS TO QATARI SHEIKH IN 1 BLN STG DEAL

The former prime minister of Qatar is buying Heritage Oil in a deal that values the explorer founded by the former mercenary Tony Buckingham at nearly 1 billion pounds. (http://link.reuters.com/peh98v)

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Change in nonfarm payrolls for April at 8:30--consensus 215K
Unemployment rate for April at 8:30--consensus 6.6%
New York ISM for April at 9:45--consensus 54.0
Factory orders for March at 10:00--consensus up 1.4%

ANALYST RESEARCH

Upgrades

AmTrust Financial (AFSI) upgraded to Buy from Neutral at Compass Point
Aruba Networks (ARUN) upgraded to Outperform from Perform at Oppenheimer
Avanir (AVNR) upgraded to Buy from Neutral at Mizuho
Beazer Homes (BZH) upgraded to Buy from Neutral at Compass Point
Constant Contact (CTCT) upgraded to Outperform from Neutral at RW Baird
Dynegy (DYN) upgraded to Strong Buy from Buy at ISI Group
EP Energy (EPE) upgraded to Buy from Neutral at Mizuho
Endo (ENDP) upgraded to Overweight from Equal Weight at Morgan Stanley
Evercore Partners (EVR) upgraded to Buy from Neutral at UBS
General Dynamics (GD) upgraded to Neutral from Sell at Goldman
InvenSense (INVN) upgraded to Buy from Hold at Needham
Kennametal (KMT) upgraded to Outperform from Market Perform at Wells Fargo
LinkedIn (LNKD) upgraded to Buy from Neutral at UBS
Masco (MAS) upgraded to Neutral from Sell at Goldman
Masco (MAS) upgraded to Strong Buy from Market Perform at Raymond James
Maxwell (MXWL) upgraded to Buy from Neutral at Roth Capital
Mercer (MERC) upgraded to Outperform from Market Perform at Raymond James
Mohawk (MHK) upgraded to Outperform from Market Perform at Raymond James
Novartis (NVS) upgraded to Buy from Hold at Jefferies
OpenTable (OPEN) upgraded to Buy from Neutral at BofA/Merrill
Oracle (ORCL) upgraded to Buy from Hold at Societe Generale
Piedmont Office Realty (PDM) upgraded to Hold from Sell at Stifel
Texas Instruments (TXN) upgraded to Neutral from Reduce at Nomura
United Microelectronics (UMC) upgraded to Neutral from Underperform at BofA/Merrill
Wynn Resorts (WYNN) upgraded to Buy from Neutral at Sterne Agee

Downgrades

AXIS Capital (AXS) downgraded to Underperform from Market Perform at BMO Capital
Avon Products (AVP) downgraded to Neutral from Buy at BTIG
BNP Paribas (BNPQY) downgraded to Neutral from Outperform at Credit Suisse
Broadcom (BRCM) downgraded to Neutral from Buy at Nomura
Cabot Oil & Gas (COG) downgraded to Market Perform from Outperform at Bernstein
DCT Industrial (DCT) downgraded to Neutral from Buy at ISI Group
DirecTV (DTV) downgraded to Neutral from Buy at Citigroup
Oclaro (OCLR) downgraded to Neutral from Buy at B. Riley
PSEG (PEG) downgraded to Sector Perform from Outperform at RBC Capital
Procera Networks (PKT) downgraded to Sector Perform from Outperform at Pacific Crest
United Microelectronics (UMC) downgraded to Neutral from Buy at UBS
Vocera (VCRA) downgraded to Neutral from Overweight at JPMorgan
Wisconsin Energy (WEC) downgraded to Neutral from Buy at ISI Group

Initiations

GAIN Capital (GCAP) initiated with an Outperform at Keefe Bruyette
Gastar Exploration (GST) initiated with a Buy at Wunderlich
Gran Tierra (GTE) initiated with a Neutral at Goldman
Navient (NAVI) initiated with an Equalweight at Barclays
Navient (NAVI) initiated with an Outperform at Keefe Bruyette

COMPANY NEWS

Pfizer (PFE) confirmed delivery of increased offer of $84.47 per share to AstraZeneca (AZN)
AstraZeneca (AZN) rejected proposal from Pfizer (PFE) as 'substantially' undervalued
LinkedIn (LNKD) guided to FY14 revenues that were lower than analysts' current forecasts. The company said it has no plans for a significant increase in China investment
Berry Plastics (BERY) CEO said business will improve in coming quarters
Verizon (VZ) said in a regulatory filing that it believes it would be "perverse and unjust" for the FCC to adopt rules that would "subsidize" companies like T-Mobile (TMUS) and Sprint (S) by allowing them to bid on airwaves set aside for smaller firms
InterContinental Hotels (IHG) announced a $750M special dividend
Royal Bank of Scotland (RBS) said on track to achieve capital targets

EARNINGS

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

Newell Rubbermaid (NWL), Hill-Rom (HRC), Alliant Energy (LNT), Dresser-Rand (DRC), Alon USA Energy (ALJ), Alon USA Partners (ALDW), XL Group (XL), MasTec (MTZ), Territorial Bancorp (TBNK), Black Hills (BKH), OpenTable (OPEN), Scansource (SCSC), Sequenom (SQNM), Northeast Utilities (NU), QLogic (QLGC), eHealth (EHTH), Chegg (CHGG), HCI Group (HCI), Bottomline Technologies (EPAY), Autobytel (ABTL), TeleCommunication Systems (TSYS), Mitek Systems (MITK), BioMarin (BMRN), Seattle Genetics (SGEN), Westport (WPRT), Ellie Mae (ELLI), Impax (IPXL), American Vanguard (AVD), Universal Electronics (UEIC), Audience (ADNC), Nutrisystem (NTRI), Tempur Sealy (TPX), Constant Contact (CTCT), Southwestern Energy (SWN), Akamai (AKAM), ON Semiconductor (ONNN), GigOptix (GIG), BJ's Restaurants (BJRI), PMC-Sierra (PMCS), MICROS (MCRS), InterMune (ITMN), Federated National (FNHC), Web.com (WWWW), Maxwell (MXWL), DigitalGlobe (DGI), Addus HomeCare (ADUS), SBA Communications (SBAC), Outerwall (OUTR), Outerwall (OUTR), Vertex (VRTX), Skullcandy (SKUL), Omnicell (OMCL), Western Union (WU), A10 Networks (ATEN), Wynn Resorts (WYNN), LinkedIn (LNKD), FleetCor (FLT), Affymetrix (AFFX), Expedia (EXPE)

Companies that missed consensus earnings expectations include:

Northwest Natural Gas (NWN), Exelis (XLS), Berry Plastics (BERY), Cheniere Energy (LNG), Integrys Energy (TEG), Eldorado Gold (EGO), Oil States (OIS), Frank's International (FI), Sierra Wireless (SWIR), Golden Minerals (AUMN), Southside Bancshares (SBSI), Multi-Fineline (MFLX), Bill Barrett (BBG), Manitowoc (MTW), Idenix (IDIX), Computer Programs (CPSI), LRR Energy (LRE), Medley Capital (MCC), Exelixis (EXEL), XPO Logistics (XPO), InvenSense (INVN), Insight Enterprises (NSIT), KEYW (KEYW), Entropic (ENTR), Kodiak Oil & Gas (KOG), Fluor (FLR), Actuate (BIRT), Oncothyreon (ONTY), Standard Pacific (SPF), ServiceSource (SREV), Rubicon (RBCN), RadiSys (RSYS), Procera Networks (PKT), DaVita (DVA), Bally Technologies (BYI), Cornerstone OnDemand (CSOD), DexCom (DXCM), FBL Financial (FFG), FBL Financial (FFG), Einstein Noah (BAGL)

Companies that matched consensus earnings expectations include:
Cheniere Energy Partners (CQH), Immersion (IMMR), Select Medical (SEM), Geron (GERN), SciQuest (SQI), Natural Grocers (NGVC), The Inventure Group (SNAK), First NBC Bank (NBCB), Callidus Software (CALD), Cerus (CERS)

NEWSPAPERS/WEBSITES

U.S. probing Herbalife (HLF) traders, NY Times says
DirecTV (DTV) likely open to a sale, WSJ reports (T)
Regulators against Sprint (S)-T-Mobile (TMUS) deal, sources say, NY Post reports
General Motors (GM) recalls over 50,000 Cadillac SRX SUVs, Detroit Free Press reports
Under Armour (UA) suits part of U.S. speedskating issues in Sochi, WSJ says
New York AG eyeing exchanges in high frequency probe (ICE, NDAQ), Reuters reports

SYNDICATE

Aldexa (ALDX) 1.5M share IPO priced at $8.00
Ares Capital (ARES) 11.4M share IPO priced at $19.00
Chimerix (CMRX) files $200M mixed securities shelf
EQT Midstream Partners (EQM) 10.75M share Secondary priced at $75.75
HD Supply (HDS) 30M share Secondary priced at $26.00
Immunomedics (IMMU) $30M share Spot Secondary; price range $3.35-$3.45
Investors Bancorp (ISBC) 219.581M stock offering priced at $10.00
Media General (MEG) 4.21M share Secondary priced at $15.50
Papa Murphy's (FRSH) 5.833M share IPO priced at $11.00
Tetraphase (TTPH) files $125M mixed securities shelf

In theory, the media is supposed to keep any given administration, even that of hope and change, "honest", and to report its flaws, failings, criminality and hypocrisy. In practice, this never happens, since the bulk of US, and global, media outlets are owned by a handful of corporations which in turn do everything in their power to preserve the lucrative arrangement in which the administration pretends to administer, and the media pretends to do its job. 

With this kind of informational near-monopoly, corporations - and the media - are far more interested in perpetuating the crony-capitalist status quo, which in conjunction with Wall Street's bribery funding of the three branches of US government, has come to symbolize just how broken US governance has become.

For 364 days of the year, the theater that the press and the administration are on the opposite sides of the table, continues without a glitch. However, one day a year, during the annual White House Correspondents' Association dinner, the facade falls and Obama, together with his fawning press corps, have a night of laughs in an Oscar-inspired night of self-congratularoty excess. Which, just like every other night in Washington, is at the taxpayers' expense.

Among the over 2000 "guests" enjoying the jokes were Jessica Simpson, Patrick Stewart, Matthew Morrison, Anna Chlumsky, Lindsey Vonn, Katharine McPhee, Jeremy Irvine, Lupita Nyong'o, Julianna Margulies, Sofia Vergara, Brad Paisley, Kevin Hart, Cynthia Nixon, Tim Tebow, Kareem Abdul-Jabbar, J.C. Chasez, Julia Louis-Dreyfus, Olivia Munn, Jesse Tyler Ferguson, Fred Armisen, Richard Sherman and Harvey Weinstein.

The good news: the humor - written by others, of course - was good. Here are the highlights from last night's festivities.

First, Obama's punchlines reported by Reuters:

"In 2008 my slogan was, 'Yes we can.' In 2013, it was control-alt-delete," Obama joked to an audience also studded with film and television stars.

 

"At one point, things got so bad the 47 percent called Mitt Romney to apologize," he said, referring to 2012 presidential campaign scandal in which the Republican candidate was secretly taped saying that 47 percent of Americans have become reliant on government handouts.

 

The president highlighted some of the low points of his administration's last year, dwelling on the disastrous rollout of the website for his landmark health insurance reform legislation.

 

"Of course we rolled out HealthCare.gov. That could have gone better," he deadpanned.

 

Later he turned on Republican opponents in Congress who are clamoring to repeal the legislation despite higher than expected enrollment figures in the government health care exchanges: "How well does Obamacare have to work before you stop trying to repeal it?"

 

At the end of his speech, Obama turned the audience's attention to a video monitor, which failed to work. Kathleen Sebelius, the health secretary who announced her resignation this month after overseeing the botched rollout of Obamacare, stepped to the podium to try to fix the technical glitch.

 

Obama also took a swipe at Republicans for blocking his bid to raise the minimum wage. "If you want to get paid for not working you should run for Congress just like everyone else," he said.

 

In a self-deprecating crack at his own low popularity ratings, the president referred to his fellow Democrats not wanting to campaign with him for November congressional elections in a wistful joke involving one of his daughters: "I did notice the other day that Sasha needed a speaker for career day and she invited Bill Clinton."

 

"Let's face the facts, you'll miss me when I'm gone," Obama directed to the Fox News table. "It will be harder for you to convince Americans that Hillary was born in Kenya."

Some more from  USA Today:

When McHale took over duties, he aimed straight at Obamacare's launch.

 

"It was so bad!" he said from the stage. "I don't even have an analogy, because the website is now an analogy that people use to describe other bad things. 'Boy that latest Johnny Depp movie really healthcare.gov'd at the box office.'"

 

A few of McHale's other best lines:

• On Chris Christie: "I promise that tonight will be amusing and over quickly. Just like Chris Christie's presidential bid."
• On Rob Ford: "Between Rob Ford, Justin Bieber and Ted Cruz, you just want to tell Canada, 'Hey, hey, relax. We already have a Florida.'"
• On Hillary running for office: Hillary Clinton has a lot going for her as a candidate. She has experience, she's a natural leader. And as our first female president, we could pay her 30% less! That's a saving this country could use. Who's with me??"
• On Chelsea Clinton's pregnancy: "In nine months we will officially have a sequel to Bad Grandpa."

Finally, the video clips:

In this brave New Normal world, a Chinese contraction is somehow expected to be offset by a rebound in Europe's worst economies, because following China's latest PMI miss, overnight we were told of beats in the Service PMI in Spain (56.5, vs Exp. 54.0, a 7 year high sending the Spanish 10 Year to fresh sub 3% lows), Italy at 51.1, vs Exp. 50.5, also pushing Italian yields to record lows, and France 50.4 (Exp. 50.3). We would speculate that macro events such as these, as fabricated as they may be, are relevant or even market-moving, but they aren't - all that matters is what the JPY and VIX traders at the NY Fed do in a low volume tape, usually in the last 30 minutes of the trading day. And since the trading day today happens to be a Tuesday, and nothing ever goes down on a Tuesday, the outcome is pretty much clear, and not even the absolutely abysmal Barclays earnings report has any chance of denting the latest rigged and manufactured low-volume levitation.

That said, in early trading those all important FX pairs, USDJPY (with AUDJPY) and EURUSD, are seen going in diverging directions, with the USDJPY tumbling... 

... while the Euro is soaring to multi-week highs against the dollar on Europe's exportless recovery (but really thanks to Chinese and Japanese buying). For now the slide in the USDJPY has not dragged equity futures far lower because, that's right, algos are starting to remember that it is Tuesday.

Bulletin headline summary from Bloomberg and RanSquawk

• Focus was on Spain, France and Italian Service PMIs beating expectations which pushed Bunds lower
• GBP/USD at multi-year highs helped by Euro-area PMI's and a beat on the UK Services PM, in which employment and new business picked up
• Markets now await the US trade balance, Disney, Emerson and Marathon earnings and a 3y auction
• Treasuries decline before quarterly refunding auctions begin with $29b 3Y notes. 10Y yield remains within 5bps of YTD closing low; 25bp range over past 14 wks is smallest of past two decades.
• 3Y notes to be sold today yield 0.93% in WI trading vs 0.873% at April auction; stopout yield at that level would be highest since May 2011
• Surging casualties are threatening to undermine Ukraine’s campaign to regain ground from pro-Russian militants in its easternmost cities, where insurgents killed four government troops and downed a military helicopter
• The commander of U.S. air forces in the Pacific said Russia has “increased drastically” its long-rangebomber patrols in northeast Asia as ties with America’s allies deteriorate over upheaval in Ukraine
• Service industries in Spain and Ireland showed fastest growth since before the financial crisis; Germany and Italyalso showed growth. Spanish and Italian 10Y yields fell torecord lows
• Draghi may need to take action to stop money-marketinvestors getting ahead of themselves as overnight interbank rates are starting to exceed ECB’s benchmark rate for firsttime since 2008
• European finance ministers are designing a financial-    transaction tax on equities and derivatives that could startin 2016 for the 11 nations that have signed up toparticipate
• Premature withdrawals from retirement accounts have become America’s new piggy bank, cracked open in record amounts during lean times; the IRS collected $5.7b in 2011 from penalties, meaning that Americans took out about $57 billionfrom retirement funds before they were supposed to
• Sovereign yields mostly higher. Asian stocks little changed.
• European equity markets, U.S. stock futures gain. WTI crude higher, copper falls, gold little changed

US Event Calendar

• 8:30am: Trade Balance, March, est. -$40.0b (prior -$42.3b)
  7:00pm: Fed’s Stein speaks in New York
• 7:50pm: Bank of Japan releases April 7-8 meeting minutes
• 11:00am: Fed to purchase $850m-$1.1b notes in 2036-2044 sector
• 1:00pm: U.S. to sell $29b 3Y notes

Asian Headlines

Asian and Australian markets trade mixed amid quiet trade (said to be 30% below the daily average) due to holiday-thinned volumes, with Japanese, South Korean and Hong Kong markets closed for trade in today's session.

US Headlines

OECD cuts 2014 global growth forecast to 3.4% from 3.6%, says ECB should consider more stimulus to tackle low inflation and lowers 2014 US GDP forecast to 2.6% from 2.9% in November.

Equities

European stock futures opened positively, with markets taking their cue from stronger US stock futures overnight and UBS earnings, however failed to hold on to the best levels of the session as Barclays (-4.5%) earnings and Ukraine fears, on vague Twitter reports of Russia moving troops into Eastern Ukraine, weighed on equities, however prices have since retraced (Eurostoxx 50 trades flat on the day) on stronger PMIs and no further news out of Ukraine. AstraZeneca (-2.4%) release details of its drug pipeline in what looks like a bid to defend against the Pfizer bid, Merck have now confirmed the sale of its consumer care unit to Bayer for USD 14.2bln.

FX

GBP/USD trades at August 2009 highs of 1.6946 helped by a 7 year high in Spanish Services PMI, with strong readings from France and Italy and the UK. EUR/USD broke through the 1.3900 handle which in turn pushed the USD index (-0.33%) to its lowest since October 2013. UBS note, in the absence of an ECB refi cut this Thursday EUR/ USD might push beyond 1.4000.

The RBA kept rates unchanged at 2.50%, alongside expectations. However the RBA refrained from talking down the AUD and struck a neutral tone.

* * *

Finally, here is the overnight recap from DB's Jim Reid

Markets are in a bit of a holding pattern following Friday’s US payrolls surprise and with holidays affecting volumes in London, Hong Kong, Tokyo and continental Europe over the last few days. We also get the sense that many are taking a wait-and-see approach to events on the near-term horizon including Yellen’s JEC testimony on Wednesday, the ECB/Draghi on Thursday and the potential for the conflict in Ukraine to intensify from already-heightened levels. Ahead of all that, Wall Street had a decent start to the week, recovering from the early lows yesterday. The S&P500 posted a 0.19% gain helped by a beat in the US non-manufacturing ISM data (55.2 vs 54.0 expected). However, the price action in US stocks had a defensive tone to it with the lower-beta utility (+0.77%) and telco (+0.56%) sectors enjoying the best of gains while financials (-0.33%), autos (-0.52%) and household goods (-0.26%) lagged. Dragging US financials lower was the reaction to JPM’s (-2.45%) warning late on Friday that its Q2 markets revenue is likely to be down 20% yoy, marking the second straight quarter of weak trading revenues not just from JPM but from a number of large global broker-dealers. Meanwhile the auto sector was weighed by news that GM (-0.63%) had issued another product recall that will impact more than 50,000 crossover vehicles. Ford (-1.01%) also announced a product recall though the number of recalled vehicles was much smaller at 4,000. It’s still very early days but so far the “Sell in May” effect hasn’t come into play yet with the S&P500 marginally positive on a month-to-date basis.

The strategy has reaped decent returns in recent years with the S&P500 down an average of 3.4% during the month of May from 2010 to 2013. Low volatility continues to be a theme for many markets though we should point out that today marks the fourth anniversary of the May 6th 2010 “flash crash” which saw the DOW lose 1000 points in a matter of minutes before recovering those losses just as quickly. It’s interesting to see that academics and market participants are still debating the exact cause of those day’s events. Closer to the current day, another debate worth having is the exact cause for the rally in treasury yields following last Friday’s the significantly above- consensus non-farm payrolls report. DB’s Alan Ruskin writes that for well established reasons, a multi-decade Pavlovian response to much stronger than expected US data has been higher Treasury yields. However last Friday, this plainly did not work. Alan notes 11 possible reasons for the UST’s resilience including firstly that the Fed was right about the “stock versus flow” effect - the Fed’s large bond holdings will suppress yields far into the future.

Secondly, the flow is bullish given the scale of QE relative to a shrinking deficit. Thirdly, there are very large net short leveraged positions including record CFT Eurodollar shorts and very large 10yr equivalents.

Monday saw UST yields (+2bp) give back some of their outperformance from Friday and the 10yr managed to close just above 2.60% (2.607% at the close) due largely to the above-mentioned ISM non-manufacturing report. Looking deeper into the non-manufacturing ISM, the headline number rose to the highest level since August 2013 and higher than the 54.0 Bloomberg consensus. In the detail of the report, business activity (60.9 vs. 53.4) and new orders (58.2 vs. 53.4) significantly improved as the former reached the highest level since last August. A couple of forecasters upgraded their estimates for Q2 US GDP growth following the data. Outside of the ISM, the Fed released its quarterly Senior Loan Officer Survey which indicated that banks eased their lending policies for commercial and industrial loans and commercial real estate loans and banks saw stronger demand for both types of loans. The hope for the US bulls is that this translates into higher capital expenditure in the near future. The survey indicated more mixed conditions for consumer credit. More broadly, the environment of low volatility and low USD rates remains conducive for credit new issuance. According to Reuters, last month saw $60bn in new issuance from EM which was more than half of the $100bn issued in the first quarter of 2014. In the US high grade market, April saw US$104bn in new deals, which was its biggest April ever excluding the government-guaranteed paper issued during April 2008 according to the IFR.

Yesterday, construction equipment maker Caterpillar Inc became the first US company, excluding financials, to price a 50yr bond in nearly a year. The company priced $500m in “half-century” bonds at a price of treasuries plus 137.5bp which attracted an order book of $8bn. Interestingly this is not the longest dated bond issued by Caterpillar. They have a “century bond” issued in 1997 that matures in 2097 (WSJ).

Across the Atlantic, there was a muted reaction to the weekend’s report in El Pais suggesting that Draghi had formulated a two-stage monetary policy strategy. The report said that the ECB may act in June if inflation does not pick up and the EUR stays strong, by firstly cutting rates. The ECB would then consider asset purchases as second step in autumn according to the report. EURUSD was unchanged yesterday. Moving further east, the situation in Ukraine seemed to deteriorate further with reports of up to 20 casualties in fighting the eastern Ukraine towns and cities. Gold added 0.8% yesterday, adding to a 1.2% gain yesterday, supported by the Ukraine/Russia tension. Much of Asia is closed today (Japan, South Korea, Hong Kong), though the bourses that are open are trading broadly firmer including the Shanghai Comp(+0.2%) and ASX200 (+0.3%). The Reserve Bank of Australia held rates constant at its policy meeting today, as widely expected by the market and DB, and there were very minor changes to the policy statement. The AUD is a little higher (+0.1%) following the RBA statement. S&P500 futures are trading 0.15% higher in the Asian timezone.

In terms of other news flow, the FT’s Robin Harding highlights a recent study by the Fed looking at the effect of short term and long term unemployment on inflation. The Fed study suggests that both short and long term unemployment have a similar downward effect on inflation across US cities - contrary to some market participants’ views that it’s only short-term unemployment that is putting downward pressure on inflation and that the long term unemployed are too disconnected from the labour market to hold down wage inflation. Long term unemployment remains one of the key labour market health indicators for the Fed Chair.

Looking at the day ahead, we have the Euroarea services PMIs and retail sales data followed by US March trade and the IBD/TIPP economic optimism index. A number of European earnings releases are worth watching including UBS, Barclays and Lafarge. A Eurogroup/ECOFIN meeting winds up today. The OECD publishes its spring economic outlook and forecasts for member countries.

Looking at the rest of the week, Wednesday will be largely dictated by Yellen’s congressional testimony. Data flow includes consumer credit, German factory orders and the final China HSBC Services PMI for April. The highlight on Thursday is the ECB. The BoE also meets on Thursday. China will release April trade data – this is a key data release following the disappointing trade reports in the year to date. This takes us to Friday where Chinese CPI, UK industrial production and JOLTs job openings round out the week’s calendar.

Submitted by Michael Snyder of The American Dream blog,

Virtually everything that you do is being watched.  Do you drive a car?  Do you watch television?  Do you use a cell phone?  As you do any of those things, information about you is being recorded and tracked.  We live at a time when personal privacy is dying.  And it is not just governments that are doing this.  In fact, sometimes private companies are the biggest offenders.  It turns out that gathering information about all of us is very, very profitable.  And both government entities and private companies are going to continue to push the envelope when it comes to high tech surveillance until people start objecting to what they are trying to do.  If we continue down the path that we are currently on, it is inevitable that we will end up living in an extremely restrictive “Big Brother” police state where basically everything that we do is very closely watched, monitored, tracked and controlled.  And such a day may be much closer than you think.  The following are 10 examples of how “Big Brother” is steadily creeping into our daily lives…

#1 Our cars are rapidly being transformed into high tech “Big Brother” surveillance devices.  In fact, a push is being made to require all new vehicles to include very sophisticated black box recorders…

As if the government wasn’t already able to track our movements on the nation’s highways and byways by way of satellites, GPS devices, and real-time traffic cameras, government officials are now pushing to require that all new vehicles come installed with black box recorders and vehicle-to-vehicle (V2V) communications, ostensibly to help prevent crashes.

 

Yet strip away the glib Orwellian doublespeak, and what you will find is that these black boxes and V2V transmitters, which will not only track a variety of data, including speed, direction, location, the number of miles traveled, and seatbelt use, but will also transmit this data to other drivers, including the police, are little more than Trojan Horses, stealth attacks on our last shreds of privacy, sold to us as safety measures for the sake of the greater good, all the while poised to wreak havoc on our lives.

 

Black boxes and V2V transmitters are just the tip of the iceberg, though. The 2015 Corvette Stingray will be outfitted with a performance data recorder which “uses a camera mounted on the windshield and a global positioning receiver to record speed, gear selection and brake force,” but also provides a recording of the driver’s point of view as well as recording noises made inside the car. As journalist Jaclyn Trop reports for the New York Times, “Drivers can barely make a left turn, put on their seatbelts or push 80 miles an hour without their actions somehow, somewhere being tracked or recorded.” Indeed, as Jim Farley, Vice President of Marketing and Sales for Ford Motor Company all but admitted, corporations and government officials already have a pretty good sense of where you are at all times: “We know everyone who breaks the law, we know when you’re doing it. We have GPS in your car, so we know what you’re doing.”

#2 A new Michigan law will ban thousands of preppers and small farmers from owning farm animals.  What are they going to do next?  Ban us from growing our own food?

#3 Have you ever collected anything?  If so, the FBI might swoop in and grab your collection someday even if you have not committed a crime.  If you think that this sounds crazy, you should consider what happened to a man named Don Miller recently…

FBI agents Wednesday seized “thousands” of cultural artifacts, including American Indian items, from the private collection of a 91-year-old man who had acquired them over the past eight decades.

 

An FBI command vehicle and several tents were spotted at the property in rural Waldron, about 35 miles southeast of Indianapolis.

The FBI did not have any evidence that a crime had been committed prior to seizing the collection, and Mr. Miller has not been arrested or charged with any crime.  The FBI says that it is going to catalog the collection“to determine whether some of the items might be illegal to possess privately”…

The aim of the investigation is to determine what each artifact is, where it came from and how Miller obtained it, Jones said, to determine whether some of the items might be illegal to possess privately.

#4 A father of a 4-year-old girl has been told that he will no longer be allowed to send healthy homemade lunches with his daughter when she attends her pre-kindergarten program because they conflict with federal guidelines.

#5 Do you watch television?  Well, if you have a newer television there is a very good chance that your television is watching you as well…

In November, the British tech blogger Doctorbeet discovered that his new LG Smart TV was snooping on him. Every time he changed the channel, his activity was logged and transmitted unencrypted to LG. Doctorbeet checked the TV’s option screen and found that the setting “collection of watching info” was turned on by default. Being a techie, he turned it off, but it didn’t matter. The information continued to flow to the company anyway.

#6 A plan that is being proposed in Fairfax County, Virginia would ban “frequent and large gatherings at neighborhood homes“.  This would include parties, scout gatherings and home Bible studies.

#7 At a public school in Florida, a 12-year-old boy has been banned from reading the Bible during “free reading time”…

A Florida schoolteacher humiliated a 12-year-old boy in front of an entire class after she caught him reading the Bible during free reading time.

 

The teacher at Park Lakes Elementary School in Fort Lauderdale ordered Giovanni Rubeo to pick up the telephone on her desk and call his parents.

 

As the other students watched, the teacher left a terse message on the family’s answering machine.

 

“I noticed that he has a book—a religious book—in the classroom,” she said on the recording. “He’s not permitted to read those books in my classroom.”

#8 In the USSA, a young child cannot even build a tree fort with his friends without the threat of being confronted by the police state.  Just consider what happened to one little fifth-grade boy down in Georgia a few weeks ago…

A fifth-grader says he was terrified when a police officer pointed a gun at him and his friends while they built a tree fort.

 

Omari Grant, 11, said he and his friends often play in a wooded area behind his home and were building a fort when a neighbor in the next subdivision called police to complain about what the boys were doing.

But no one anticipated what Omari and his mother say happened next.

 

“I guess the release of tension was like, ‘Mom, he had a gun in my face, Mommy. Mommy, he had a gun in my face,’” said Janice Baptiste, Omari’s mother.

The officer reportedly used very filthy language as he pointed his gun at the boys, and he forced them to get out of the tree and lay down on the ground…

“I was thinking that I don’t want to be shot today, so I just listened to what they said,” Omari said.

 

Omari said the officer holding his gun also used foul language and made him and his friends lay down on the ground.

 

“I learned that they’re supposed to help you not make you feel scared to even come outside,” Omari said.

#9 People like to joke about “the eye in the sky”, but it is no joke.  Technology that was originally developed for “blanket surveillance” during the Iraq war is now returning home…

Persistent Surveillance Systems has developed a surveillance camera on steroids. When attached to small aircraft, the 192-megapixel cameras record the patterns of the planetary life they fly over for hours at a time.

 

According to the Washington Post, this will give the police and other customers a “time machine” they can simply rewind when they need it. Placed strategically at the highest points of any town or city, these cameras could provide the sort of blanket surveillance that’s hard to avoid. The inventor of the camera, a retired Air Force officer, helped create a similar system for the city of Fallujah, the site of two of the most violent battles of the U.S. occupation of Iraq. It’s just one example of how wartime surveillance technologies are returning home for “civilian use.”

#10 Have you ever purchased storable food?  If so, you should know that it is now considered to be “suspicious activity” in some areas of the country.  Just check out what is happening in New York state…

1-866 SAFE NYS is part of Safeguard New York, an NY State counterterrorism program that uses promotional material to encourage citizens to report people for engaging in “suspicious activity….which makes them stand out from others”.

 

An accompanying letter provided by the state trooper listed such “suspicious activity” as the purchase of MREs (Meals Ready to Eat), flashlights, weather proof ammunition, night vision equipment, match containers, or gas masks.

For even more examples like this, please see my previous article entitled “19 Signs That America Is Being Systematically Transformed Into A Giant Surveillance Grid“.

Sadly, most Americans are totally oblivious to all of this.

Most Americans are so addicted to entertainment and to their electronic devices that they have no idea what is going on in the real world.

I came across the following video entitled “Look Up” on YouTube earlier today.  I think that it does a great job of showing what our obsession with our electronic devices is doing to us.  Watch it for yourself and see what you think…

• Alibaba files for what may be biggest tech IPO (Reuters)
• Early Tap of 401(k) Replaces Homes as American Piggy Bank (BBG)
• Developers Turn Former Office Buildings Into High-End Apartments (WSJ)
• Thai court orders Yingluck Shinawatra to step down as PM (Guardian)
• German industry orders fell 2.8% in March, the biggest drop in one and a half years (RTE)
• Ukraine Bulls Scatter as Death Toll Mounts (BBG)
• China Property Slump Adds Danger to Local Finances (BBG)
• Stein Says Fed May See Bouts of Volatility as It Approaches Exit (BBG)
• Junk-Bond Traders Pile Onto Hedges Amid Fed After Rally (BBG)
• Pimco's bad bets on emerging markets add to firm's troubles (Reuters)
• Alibaba Partners Keep Control After Shunning Hong Kong for U.S. (BBG)
• Fat-Destroying Machine Doubted by Stock Traders (BBG)
• Encana to Buy Eagle Ford Shale From Freeport-McMoRan for $3.1 Billion (WSJ)

Overnight Media Digest

WSJ

* U.S. regulators have expanded their investigation into large banks' hiring practices in Asia, seeking more information from at least five U.S. and European firms. The SEC in early March sent letters to a group of companies including Credit Suisse Group AG, Goldman Sachs Group Inc, Morgan Stanley, Citigroup Inc and UBS seeking more information about their hiring in Asia. (http://r.reuters.com/xad29v)

* Chinese e-commerce company Alibaba <IPO-ALIB.N> filed plans to offer its shares in the United States, valuing itself at more than $100 billion, and confirming its size and scale ahead of what is expected to be one of the largest stock listings in history. (http://r.reuters.com/bed29v)

* Twitter Inc's early investors and employees got their first big chance to sell their stock on Tuesday since the social-media company went public in November. And they took it. A surge in selling pummeled the stock, sending it down 18 percent and wiping out $4 billion of market value. (http://r.reuters.com/ded29v)

* Target Corp isn't the only U.S. retailer looking for a new boss - and new ideas. Department store chain J.C. Penney Co, teen retailer American Eagle Outfitters Inc and a handful of others are also on the hunt for chief executives. The turnover at the top - and in some cases the extended searches for replacements - are further evidence of the pressure on an industry where once successful models are out of step with Americans' new shopping habits. (http://r.reuters.com/gud29v)

* Merck & Co is getting out of the business of making Claritin allergy medicines and Coppertone sunscreens, selling off its over-the-counter business to Bayer AG for $14.2 billion. The deal is the latest in a wave of mergers and acquisitions that is reshaping the global pharmaceutical industry. (http://r.reuters.com/ged29v)

* New York's spring auctions got off to a trotting, if not sprint-speed, start Tuesday as Christie's sold $285.9 million worth of Impressionist and modern art. (http://r.reuters.com/xed29v)

FT

Chinese internet giant Alibaba (IPO-ALIB.N) filed documents for what could be one of the largest U.S. initial public offerings on record, pitching itself as a way to invest in the rapid growth of ecommerce in China and beyond.

Almost two-thirds of voters, including half of Tory supporters, want the next government in the United Kingdom to be tougher with big business, amid widespread concern over high executive pay and ethics, according to a Financial Times opinion poll.

Shares of social media website Twitter tumbled nearly 18 per cent on Tuesday after the end of restrictions on insider sales following its IPO last November.

Swedish Finance Minister Anders Borg told the Financial Times that he viewed Pfizer's pledge to keep AstraZeneca jobs in Britain and Sweden with scepticism after a similar deal in 2002 when Pfizer took over Swedish company Pharmacia.

Surging equity markets made 2013 one of the highest earning years since the financial crisis as the world's 25 best-paid hedge fund managers took home a combined $21.1bn, 50 per cent more than in 2012.

NYT

* Chinese e-commerce behemoth Alibaba Group (IPO-ALIB.N) filed paperwork on Tuesday in the United States to sell stock to the public for the first time. The company is expected to raise $15 billion to $20 billion, which would make it the biggest American IPO since Facebook Inc's $16 billion offering in May 2012. (r.reuters.com/ted29v)

* Yahoo Inc most likely will receive $10 billion to $15 billion for the 9 percent stake that it is required to sell in Alibaba Group. The Chinese e-commerce company's IPO will bring an end to the long honeymoon of Yahoo's chief executive, Marissa Mayer. She will have to prove to Wall Street that she has a viable plan to save Yahoo and will use the Alibaba windfall wisely. (r.reuters.com/rud29v)

* German drug-maker Bayer AG said it has agreed to acquire Merck & Co Inc's consumer care business for $14.2 billion, a deal that will make Bayer one of the largest providers of over-the-counter products. Bayer gains control of several well-known brand names, including Claritin, Coppertone and Dr. Scholl's. (r.reuters.com/sud29v)

* Walt Disney Co reported net income for its second quarter of $1.92 billion, or $1.08 per share, an increase of 27 percent. No single business or entertainment offering was responsible for Disney's overall spike in profit, although the runaway success of "Frozen" may have been the largest contributor. (r.reuters.com/xud29v)

* The Financial Industry Regulatory Authority has fined Morgan Stanley $5 million, saying that the firm did not follow proper procedures in the initial public offerings for 83 companies including Facebook Inc and Yelp Inc. (r.reuters.com/byd29v)

* Two senior partners in Apollo Global Management's private equity division, Stan Parker and Jordan Zaken, plan to leave the firm. They would be following Ali Rashid, another senior partner who quietly left this year. The departures of these three partners underscore the growing pains that Apollo is facing as it adjusts to life as a publicly traded company. (r.reuters.com/fyd29v)

* The new Fiat-Chrysler Automobiles laid out an ambitious business plan on Tuesday that relies heavily on growing sales of its Jeep sport utility vehicles. Mike Manley, chief of the Jeep division, said Fiat Chrysler expects to sell one million Jeeps this year - a significant increase from the 800,000 the company had projected. (r.reuters.com/kyd29v)

* Shares of Twitter Inc went into free fall on Tuesday as early investors became eligible to sell their shares on the market for the first time. The company's shares dropped 17.8 percent, to close at $31.85, their lowest level since the company's initial public offering in November. (r.reuters.com/myd29v)

* General Electric Co's $13.5 billion bid for the power generation and transmission units of the French company Alstom poses a grave challenge for Siemens AG. While the French government last week indicated that it preferred the Siemens bid, President François Hollande now seems mainly trying to induce a better offer from G.E. (r.reuters.com/pyd29v)

* General Motors Co is recalling about 56,000 Saturn Aura sedans from the 2007-8 model years because a transmission shifter cable could break, which would keep the driver from being able to shift the transmission into park. The company said it was aware of 28 crashes and four injuries related to the defect over the last seven years. (r.reuters.com/ryd29v)

* The United States trade deficit narrowed in March to $40.4 billion, down 3.6 percent from a revised February imbalance of $41.9 billion, the Commerce Department reported on Tuesday. The February trade gap was the biggest in five months. Exports rebounded to the second-highest level on record, led by strong gains in sales of aircraft, autos and farm goods. (r.reuters.com/tyd29v)

* AstraZeneca PLC, the British drug maker, on Tuesday made an impassioned defense for itself as a stand-alone company, just a day after the American pharmaceutical giant Pfizer Inc again pressed its case for a $106 billion takeover offer. AstraZeneca's Chief Executive Pascal Soriot called his company's pipeline of drugs in development one of the best in the industry and said the talent it had acquired and the restructuring it had undergone in the last 18 months made a strong case for remaining on its own. (r.reuters.com/wyd29v)

* Office Depot Inc said it would close at least 400 stores because its merger with OfficeMax Inc resulted in overlapping locations. The company had about 1,900 stores in the United States at the end of the first quarter. (r.reuters.com/zyd29v)

* Whole Foods Market Inc cut its profit outlook for the third time in recent months on Tuesday, signaling the intensifying competition the grocery chain is facing in the market for organic and natural foods. Whole Foods now expects to earn $1.52 to $1.56 per share this year, down from its previous forecast of $1.58 to $1.65 per share. (r.reuters.com/baf29v)

Canada

THE GLOBE AND MAIL

* Canadian Prime Minister Stephen Harper rejects the notion that he has shown disrespect to Supreme Court of Canada Chief Justice Beverley McLachlin, and refuses to withdraw, clarify or apologize for his assertion that she acted improperly. The Prime Minister's Office said last week that Chief Justice McLachlin sought to involve him in an inappropriate conversation about a case that eventually came before the Supreme Court. (r.reuters.com/dyf29v)

Reports in the business section:

* Canadian sports channel TSN said on Tuesday that it was launching three new channels this fall, bringing its own suite of 24-hour sports properties to five. The move is a testament to a growing belief in the industry that, with an exploding array of TV options for viewers, large audiences can only be earned by live events such as professional sports. (r.reuters.com/ryf29v)

NATIONAL POST

* As Europe reels from Moscow's belligerence and utter dependence on its oil and gas supplies, the Stephen Harper government is positioning itself as a reliable partner ready to offer energy security to the continent. Canada's Natural Resources minister Greg Rickford was out advertising the country's formidable crude oil and natural gas resources to energy ministers of Germany, France, Italy, Japan, the UK and United States in Rome on Tuesday. (r.reuters.com/gag29v)

* Canada's prisons are so jam-packed with inmates that many are forced to "double-bunk" in shared cells. Moreover, although recent construction will resolve the over-crowding in the short term, Correctional Service Canada has failed to develop expansion plans to properly take into account the growing number of inmates, according to a report released on Tuesday by Auditor General Michael Ferguson. (r.reuters.com/mag29v)

FINANCIAL POST

* Toronto is on the verge of becoming the second Canadian city where the average price of a detached home hits the $1 million mark. Results released by the Toronto Real Estate Board for April sales show increased pressure on the single family portion of the resale housing market, pushing prices in the old city of Toronto close to $1 million for a detached piece of property. (r.reuters.com/nag29v)

* Veteran Canadian fashion retailer Boutique Jacob Inc is closing its doors after years of pressure from global fashion players. The Montreal-based company, which has 92 stores across Canada, will liquidate its inventory in the coming weeks after filing a notice of intention under the Bankruptcy and Insolvency Act. (r.reuters.com/sag29v)

Hong Kong

-- A 49-year-old man in Sichuan died of H5N6 bird flu in the first known human infection of the strain in the world. (link.reuters.com/nyc29v)

-- Reforming the board and clarifying the mission of the MTR Corporation will help the government reassert control over the rail company after a delay to the high-speed rail link exposed its weak oversight, transport and management experts say. (link.reuters.com/pyc29v)

-- Disappointed by poor sales during the May Day holiday, mainland developers are expected to deepen their price cuts in a bid to reverse market sentiment as there is no sign of any relaxation in China mortgage policies. (link.reuters.com/ryc29v)

THE STANDARD

-- Tencent has attracted 80 billion yuan ($12.85 billion) for its wealth management product Licaitong in less than four months since its launch, taking its daily inflow to 727 million yuan. This lags behind rival Alibaba's Yuebao platform, which had pulled in an accumulated 541.3 billion yuan by March 31. (link.reuters.com/syc29v)

HONG KONG ECONOMIC JOURNAL

-- A corruption case involving senior management of Sun Hung Kai Properties and a former top Hong Kong government official is set to go to trial in High Court on Thursday. The trial is expected to run for 70 days.

HONG KONG ECONOMIC TIMES

-- Guotai Junan Securities Co Ltd, the parent of Hong Kong-listed Guotai Junan International Holdings Ltd, is planning a listing in China's A share market, raising about 20 billion yuan ($3.21 billion), according to market estimates.

Britain

The Telegraph

CARPHONE WAREHOUSE AND DIXONS EDGE TOWARDS 3.7 BLN POUND MERGER

Carphone Warehouse and Dixons Retail are on the cusp of agreeing a near 4 billion pound merger to create a powerful UK retailer with 1,300 stores. (http://link.reuters.com/tuc29v)

CITY WATCHDOG COULD BE STRIPPED OF PENALTY POWERS

British regulators could be forced to hand over decision-making powers on fining and banning banks, brokers and asset managers to an independent body amid criticism of the way the authorities currently handle the penalty process.(http://link.reuters.com/vuc29v)

The Guardian

ASTRAZENECA HITS BACK AS INVESTOR BACKS PUBLIC INTEREST TEST FOR PFIZER TAKEOVER

AstraZeneca has hit back following an unwanted 63 billion pound takeover approach from Pfizer by setting out a new growth plan that targets a 75 percent rise in annual revenue by 2023. (http://link.reuters.com/wuc29v)

OECD WARNING ON HOUSE PRICES ADDS TO PRESSURE ON OSBORNE OVER HELP TO BUY

George Osborne is under further pressure to scale back the Treasury's Help to Buy mortgage scheme after calls from a leading thinktank for a clampdown on easy credit to bring "excessive" house prices under control. (http://link.reuters.com/xuc29v)

The Times

ALIBABA SET TO RAISE BILLIONS IN RECORD WALL STREET DEBUT

Chinese internet giant Alibaba <IPO-ALIB.N> is set to float in what is expected to be one of the largest technology debuts in American stock market history. (http://link.reuters.com/ruc29v)

RETURN TO SENDER: ROYAL MAIL FORCED INTO U-TURN ON TOP PAY

Royal Mail is running the risk of alienating its chairman after it headed off a potential clash with the government by ruling out a pay rise for its chief executive, Moya Greene. (http://link.reuters.com/suc29v)

The Independent

BARCLAYS' INVESTMENT BANK PROFITS HALVE

Barclays chief executive Antony Jenkins is set to announce sweeping changes after profits at its investment bank division halved. (http://link.reuters.com/byc29v)

TESCO TO LAUNCH OWN BRAND SMARTPHONE

Tesco is seeking to replicate the success of its budget tablet, Hudl, by launching its own Android smartphone before the end of the year. (http://link.reuters.com/dyc29v)

Fly On The Wall 7:00 AM morning summary

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Nonfarm productivity for Q1 at 8:30--consensus down 1.2%
Consumer credit for March at 15:00--consensus $15.5B

ANALYST RESEARCH

Upgrades

ARRIS (ARRS) upgraded to Strong Buy from Outperform at Raymond James
AbbVie (ABBV) upgraded to Overweight from Equal Weight at Morgan Stanley
Advanced Energy (AEIS) upgraded to Strong Buy from Outperform at Raymond James
Celluar Dynamics (ICEL) upgraded to Outperform from Market Perform at Leerink
Chipotle (CMG) upgraded to Buy from Neutral at Longbow
Eagle Bancorp (EGBN) upgraded to Outperform from Market Perform at Keefe Bruyette
Electronic Arts (EA) upgraded to Outperform from Neutral at RW Baird
FirstEnergy (FE) upgraded to Buy from Hold at Jefferies
Forest Oil (FST) upgraded to Equal Weight from Underweight at Morgan Stanley
Hecla Mining (HL) upgraded to Buy from Neutral at Roth Capital
Hilton (HLT) upgraded to Buy from Neutral at MKM Partners
Hilton (HLT) upgraded to Overweight from Equal Weight at Morgan Stanley
Infinity Pharmaceuticals (INFI) upgraded to Buy from Hold at Jefferies
J.C. Penney (JCP) upgraded to Neutral from Sell at UBS
Legacy Reserves (LGCY) upgraded to Outperform from Neutral at RW Baird
Office Depot (ODP) upgraded to Outperform from Neutral at Credit Suisse
Office Depot (ODP) upgraded to Outperform from Neutral at Credit Suisse
Planar Systems (PLNR) upgraded to Buy from Neutral at B. Riley
TripAdvisor (TRIP) upgraded to Buy from Hold at Cantor

Downgrades

Aegerion (AEGR) downgraded to Market Perform from Outperform at Cowen
eBay (EBAY) downgraded to Neutral from Buy at SunTrust
Essential Energy (EEYUF) downgraded to Hold from Buy at Canaccord
GNC Holdings (GNC) downgraded to Hold from Buy at Deutsche Bank
GNC Holdings (GNC) downgraded to Neutral from Buy at Longbow
Infosys (INFY) downgraded to Sell from Neutral at UBS
Marriott (MAR) downgraded to Equal Weight from Overweight at Morgan Stanley
Primerica (PRI) downgraded to Outperform from Strong Buy at Raymond James
ReachLocal (RLOC) downgraded to Equal Weight from Overweight at First Analysis
Veresen (FCGYF) downgraded to Hold from Buy at Canaccord
Whole Foods (WFM) downgraded to Hold from Buy at Deutsche Bank
Whole Foods (WFM) downgraded to Market Perform from Outperform at BMO Capital
Whole Foods (WFM) downgraded to Neutral from Overweight at Piper Jaffray
Whole Foods (WFM) downgraded to Sell from Hold at Cantor
Zoetis (ZTS) downgraded to Underweight from Equal Weight at Morgan Stanley

Initiations

Bluerock Residential (BRG) initiated with a Buy at Wunderlich
CBS Outdoor Americas (CBSO) initiated with a Buy at Citigroup
CBS Outdoor Americas (CBSO) initiated with a Buy at Goldman
CBS Outdoor Americas (CBSO) initiated with a Neutral at BofA/Merrill
CBS Outdoor Americas (CBSO) initiated with an Equal Weight at Evercore
CBS Outdoor Americas (CBSO) initiated with an Outperform at Wells Fargo
CBS Outdoor Americas (CBSO) initiated with an Overweight at JPMorgan
CBS Outdoor Americas (CBSO) initiated with an Overweight at JPMorgan
CBS Outdoor Americas (CBSO) initiated with an Overweight at Morgan Stanley
Dover (DOV) initiated with a Market Perform at Bernstein

COMPANY NEWS

Chinese internet giant Alibaba formally filed with the SEC for an IPO for up to $1B worth of stock
Freeport McMoRan (FCX) will sell Eagle Ford interests for $3.1B to Encana (ECA) subsidiary
Disney (DIS) reported earnings and revenue that topped expectations, including revenues at its studio entertainment segment that grew 35% to $1.8B
FireEye reported a mixed quarter and gave Q2, FY profit outlooks that disappointed. The company also announced the acquisition of nPulse

Technologies

Repsol (REPYY) sold an 11.86% YPF (YPF) stake to Morgan Stanley (MS)
Caesar's (CZR) announced plans to list stock for its Caesars Entertainment Operating subsidiary
Electronic Arts (EA) reported profit and sales that widely beat expectations and announced a new $750M stock repurchase program
Siemens (SI) said it would acquire the Rolls-Royce Energy (RYCEY) aero-derivative gas turbine and compressor business for EUR 950M

EARNINGS

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

Strayer (STRA), Spectra Energy (SE), Talisman Energy (TLM), Hawaiian Electric (HE), Cognizant (CTSH), Vitamin Shoppe (VSI), Voya Financial (VOYA), Humana (HUM), Gran Tierra (GTE), Lumos Networks (LMOS), Agrium (AGU), Era Group (ERA), Liberty Global (LBTYA), Energy Transfer Partners (ETP), American Financial Group (AFG), Midstates Petroleum (MPO), WPX Energy (WPX), Radian Group (RDN), Galena (GALE), Cimarex Energy (XEC), Sapient (SAPE), National Interstate (NATL), ReachLocal (RLOC), Sunoco Logistics (SXL), Marathon Oil (MRO), Aegerion (AEGR), ICU Medical (ICUI), Microchip Technology (MCHP), Myriad Genetics (MYGN), Potbelly (PBPB), RealPage (RP), Limelight Networks (LLNW), Jive Software (JIVE), Move, Inc. (MOVE), Enphase Energy (ENPH), Silver Spring Network (SSNI), GSI Group (GSIG), ONEOK Partners (OKS), Western Gas Partners (WES), Sparton (SPA), GenMark (GNMK), First Marblehead (FMD), Pioneer Natural (PXD), Cytokinetics (CYTK), Live Nation (LYV), Tornier (TRNX), Tremor Video (TRMR), Thoratec (THOR), ZAGG (ZAGG), U.S. Auto Parts (PRTS), Groupon (GRPN), First Solar (FSLR), ARRIS (ARRS), Activision Blizzard (ATVI), Allstate (ALL), Electronic Arts (EA), Fiesta Restaurant (FRGI), Viasystems (VIAS)

Companies that missed consensus earnings expectations include:

Hydrogenics (HYGS), Dawson Geophysical (DWSN), NTELOS (NTLS), Susser Holdings (SUSS), Susser Petroleum Partners (SUSP), Lamar Advertising (LAMR), Achillion (ACHN), USA Compression (USAC), Memorial Production (MEMP), AB InBev (BUD), Endeavour (END), Truett-Hurst (THST), Renewable Energy (REGI), Summit Midstream (SMLP), Air Transport Services (atsg), Nevsun Resources (NSU), Regency Energy Partners (RGP), Energy Transfer Equity (ETE), Papa John's (PZZA), Southwest Gas (SWX), North American Energy (NOA), Masonite (DOOR), Blueknight Energy Partners (BKEP), American States Water (AWR), Prospect Capital (PSEC), Forestar Group (FOR), Bacterin (BONE), Renewable Energy (REGI), Powell (POWL), Bio-Rad (BIO), Intermolecular (IMI), Oclaro (OCLR), zulily (ZU), Trimble Navigation (TRMB), GNC Holdings (GNC), Aviat Networks (AVNW), QuinStreet (QNST), eGain (EGAN), ExamWorks (EXAM), Cyan (CYNI), MacroGenics (MGNX), Genomic Health (GHDX), Legacy Reserves (LGCY), Frontier Communications (FTR), Cedar Realty Trust (CDR), Endurance (EIGI), Axcelis (ACLS), TripAdvisor (TRIP), Matson (MATX), Evolving Systems (EVOL), ACADIA (ACAD), Whole Foods (WFM), Datalink (DTLK), Vitesse (VTSS), Infinity Pharmaceuticals (INFI)

Companies that matched consensus earnings expectations include:

Mazor Robotics (MZOR), Rockwood (ROC), Alamo Group (ALG), DCP Midstream (DPM), FMC Corporation (FMC), QIAGEN (QGEN), Wesco Aircraft (WAIR), Spansion (CODE), Extreme Networks (EXTR), ARC Document Solutions (ARC), FireEye (FEYE), Avanir (AVNR), Conversant (CNVR), Guidance Software (GUID)

NEWSPAPERS/WEBSITES

Alstom (ALSMY) interested in taking over GE's railway signaling unit, WSJ reports
Target (TGT) seeks to find new CEO from outside firm, Bloomberg reports
Fiat (FIATY) Chairman says CEO Marchionne 'staying with us,' Detroit News reports
U.S. regulators widen probe into banks' (CS, GS, MS, C, UBS, JPM) hiring practices in Asia, WSJ reports
HP (HPQ) plans to invest over $1B to develop, offer cloud computing, Reuters says
HCA Holdings (HCA) in lead for Healthscope (CG) with A$5B bid, Australian reports
JetBlue (JBLU) CEO considers leaving when contract expires in 2015, Bloomberg says

SYNDICATE

Alibaba registers for $1B IPO
GasLog Partners (GLOP) 8.4M share IPO priced at $21.00
Martin Midstream Partners (MMLP) 3.6M share Secondary priced at $41.51
Radian Group (RDN) files to sell 15.5M shares of common stock
Sabra Health Care (SBRA) files to sell 7M shares of common stock

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

But it is now clear that Geithner never believed his own talking points. To him, too-big-to-fail and the so-called moral hazard, or safety net, that it would create can’t really ever be fully taken away. During his lecture to Summers’s class, one student asked a question about “resolution authority,” a provision of the reform laws that is supposed to let the government wind down a complex financial institution without creating a domino effect. The question prompted Geithner onto a tangent about too-big-to-fail. “Does it still exist?” he said. “Yeah, of course it does.” Ending too-big-to-fail was “like Moby-Dick for economists or regulators. It’s not just quixotic, it’s misguided.”

- From The New York Times Magazine article, What Timothy Geithner Really Thinks

Never in a million years did I think I’d ever use an article by Andrew Ross Sorkin as the basis of a blog post, but here we are. While probably entirely unintentional, his article serves to further solidify as accurate the prevailing notion across America that former head of the New York Federal Reserve and Obama’s first Treasury Secretary, Timothy Geithner, is nothing more than an addled, crony, bureaucratic banker cabin boy.

There are so many choice nuggets in this article, all of which make Geithner look worse and worse as you read on. It’s almost as if he is some sort of lab created, android bankster butler sent back to earth from the future in order to ensure Wall Street bonuses never experience a downtick. It’s truly remarkable. Early in the article, we learn a little bit about Timmy’s family history, and how, shocker, it overlaps quite nicely with Obama’s own family history.

The following lines from this day forth should be forever referred to as “the paragraph that launched a thousand conspiracy blogs.” We learn that:

But Geithner and Obama had a somewhat natural rapport. Geithner, like Obama, had an itinerant childhood. His father worked for U.S.A.I.D., and the family lived in India, Zimbabwe, Zambia and Thailand. In the conversation, they discovered that Geithner’s father ran the Ford Foundation’s Asia grant-writing program in the 1980s at the same time that Obama’s mother was at its office in Indonesia. It was a nice coincidence, Geithner says, but it still didn’t make him want the job.

Well yes, quite the coincidence indeed. Also interesting that Geithner’s father worked for U.S. A.I.D., which is the organization recently revealed to have launched the fake Cuban Twitter in an attempt to overthrow the government there. In case you missed that, you can get caught up in my post: Conspiracy Fact – How the U.S. Government Covertly Invented a “Cuban Twitter” to Create Revolution. Meanwhile, Democracy now did an expose titled, Is USAID the New CIA?

While the above is certainly interesting and deserves more research on many fronts from folks far more qualified than me, let’s move on to the meat of the article and Geithner’s unique form of bankster worship. Moving along…

But Geithner’s refusal to condemn the bankers became a recurrent theme during his time at Treasury. According to Bernanke, “I didn’t and Tim didn’t go very far in lambasting individuals in Wall Street, maybe partly because we were more focused on the problem than on the politics.” Others, however, have suggested that Geithner was simply too cozy with Wall Street. He had never worked as a banker himself, but he grew up inside the bubble of elites. (Before going into government, his first job was working for Henry Kissinger at Kissinger Associates.) He was tutored at Treasury by Summers, who later worked for the hedge fund D. E. Shaw & Company, and Rubin, who came up through Goldman Sachs and eventually joined the board of Citigroup, where he has been blamed in some circles for its taking on excessive risky debt that nearly caused the firm to collapse. Each man played a significant role in deregulating the financial industry in the 1990s by supporting the repeal of the Glass-Steagall Act, which separated commercial and investment banking; they also pushed to limit future regulation of derivatives.

There you have it. Geithner and Bernanke never saw the bankers and their practices as a problem. Rather, they seemed to believe that Poseidon came out of nowhere and splashed a once in a million year tidal wave upon the system and only trillions in free money to financial criminals could save the world.

Oh, and Geithner’s first job was working for Henry Kissinger. Wow. Quite the pedigree…

What is certain, however, is that for all the malfeasance of the biggest banks, Geithner had a predisposition that Wall Street, even as it was, remained essential to the functioning of the U.S. economy in just about every sector. “I did not view Wall Street as a cabal of idiots or crooks,” he writes in “Stress Test.” “My jobs mostly exposed me to talented senior bankers, and selection bias probably gave me an impression that the U.S. financial sector was more capable and ethical than it really was.” During his first few months in the job, Geithner fought with Summers, who felt that his protégé had become overly solicitous of the banks. Geithner dismissed Summers as espousing “the hedge-fund view.” (“Hedge-fund executives tended to see the banks as dumb, lumbering giants,” Geithner writes.) He disagreed when Summers suggested to Obama that the administration pre-emptively nationalize banks like Citigroup or Bank of America or even to try to embarrass them into changing their compensation structures. “I feared that the tougher we talked about the bonuses, the more we would own them,” Geithner writes, “fueling unrealistic expectations about our ability to eradicate extravagance in the financial industry.”

Geithner is so bad, he actually makes Larry Summers look good.

As such, it has left him open to endless criticism that he was a prisoner of “cognitive regulator capture” by Wall Street or suffered so greatly from “Lehman Syndrome” that he became soft on the industry. Simon Johnson, an economist at M.I.T., has argued that bailouts were necessary but executed in the form of a great giveaway. He has compared Geithner to Charles Maurice de Talleyrand-Périgord, the French statesman “who served the Revolution, Napoleon and the restored Bourbons — opportunistic and distrusted, but often useful and a great survivor.” Elizabeth Warren, the Massachusetts senator and creator of the Consumer Financial Protection Bureau, has written in her new book, “A Fighting Chance,” that Geithner “believed the government’s most important job was to provide a soft landing for the tender fannies of the banks.” It’s an opinion shared by Neil Barofsky, the former special inspector general of TARP. He told me in an email that Geithner, Bernanke and Paulson “consistently put the interests of the banks over those who were supposed to be helped, like struggling homeowners.” While Barofsky acknowledges that TARP “undoubtedly helped save the system,” he also says, “it was supposed to do so much more.”

 

On some level, though, data cannot settle the argument. During our time together, Geithner spoke about the “collateral beneficiaries” of the bailout, by which he meant the inconvenient fact that certain investors and institutions came out of the crisis better off. And for some, that is direct proof of another counterfactual argument. To believe that the bailout worked, they would argue, you would have to believe that the system itself was worth saving in the first place.

That’s the question very few people are willing to ask, but which is at the root of the whole debate.

But it is now clear that Geithner never believed his own talking points. To him, too-big-to-fail and the so-called moral hazard, or safety net, that it would create can’t really ever be fully taken away. During his lecture to Summers’s class, one student asked a question about “resolution authority,” a provision of the reform laws that is supposed to let the government wind down a complex financial institution without creating a domino effect. The question prompted Geithner onto a tangent about too-big-to-fail. “Does it still exist?” he said. “Yeah, of course it does.” Ending too-big-to-fail was “like Moby-Dick for economists or regulators. It’s not just quixotic, it’s misguided.”

Yep, so “Too Big To Fail” has gone nowhere and society continues to be held hostage by the criminal financial oligarchs more than ever before. How about this chart on how 37 banks became 4 in just 20 years:

After much back and forth, Obama eventually appointed his chief of staff, Jack Lew, to the job. Geithner returned to Larchmont as an empty-nester, in the same house he could not sell, where he has spent the last year writing his book, working out of the Council on Foreign Relations and giving speeches for six-figure sums. While he claims he is through with government, he still maintains an intimate relationship with Obama, who was rumored to have recruited him to succeed Bernanke as chairman of the Federal Reserve.

 

Geithner admitted that he struggled over what to do next. He didn’t want to go back into government, and he wasn’t inclined to go into academia, but he worried about the optics of going into finance.“I think the perception problem — first of all it’s very damaging to me as I was trying to do some tough things, and I think it’s kind of very damaging to the country at the moment because it sees this basic loss of faith in government,” he said. “I thought the only thing I could really do about that was to make sure I didn’t go work for a bank or a firm that we’d regulated or that we’d rescued directly.”

 

Last month, Geithner officially began a new job as president of a modestly sized private-equity firm, Warburg Pincus. It may not be investment banking, but it’s possibly finance’s second-most-vilified industry, given how Mitt Romney’s Bain Capital experience played out in the 2012 presidential campaign. It’s very unlikely that Geithner will be using TurboTax anytime in the near future, though; he is likely to make millions if not tens of millions of dollars over the next decade if he stays in the business.

He was hesitant to join a financial firm, but he did it anyway! Didn’t take too long. Meanwhile, I think private equity will be seen as the primary villain in the next crisis, as I pointed out in the post: Leaked Documents Show How Blackstone Fleeces Taxpayers via Public Pension Funds.

I asked if the job meant that he had finally given up socialism, which his more severe detractors had accused him of, and embraced capitalism.

 

“No,” he said, with a laugh. “I wouldn’t claim that yet.”

To Geithner’s credit, he seems incapable of telling a really good lie, so through him at least we see the prevailing mentality of the corrupt sociopaths in charge of this country’s policies.

Moving along to another New York Times article, this one by former U.S. Senator Ted Kaufman, we learn more about the societal destructiveness of not going after bankers. He writes:

After the failures that led to the financial crisis, many taxpayers expected that the government would take a hard stance against those who had committed egregious violations.

 

The department first strayed from the correct path when it began years ago to resort to non-prosecution and deferred prosecution agreements with banks, focusing on enhancing bank compliance programs. Instead, it should have stayed focused on investigating senior managers and holding them accountable for lawbreaking, however difficult the consequences may be.

 

What’s far more troubling, however, is that the recent inspector general’s report and accounts from former department insiders show that the Justice Department never made mortgage origination fraud – much less the financial crisis-related investigations of high-level Wall Street executives – a priority.

 

The department’s Southern District of New York, for instance, chose instead to focus on insider-trading cases. The two task forces that the Obama administration formed (which never had a significant investigative capacity) were more for public show than substantive criminal investigations.

 

And according to the inspector general’s report, the F.B.I. ranked complex financial crimes as “the lowest of the six ranked criminal threats” and ranked mortgage fraud as “the lowest subcategory threat” within that category.

Yep, the F.B.I., good at going after peasants and protecting the oligarchs.

It is true that congressional appropriators substantially shortchanged FERA, providing only a portion of the promised $165 million. But the inspector general’s report also found that the F.B.I. diverted FERA funds to other priorities. The report said that “significant mortgage fraud cases were being closed due to the diversion” of these resources.

 

It’s also concerning that conversations took place between Justice and Treasury officials about whether it was appropriate to proceed criminally against particular banks. Under the department’s guidelines, prosecutors are supposed to consider “collateral consequences.” Again, I consider that to be a false issue, as the focus of the investigations should have been on individual executives, not institutions.

 

But the fact that the Justice Department has failed to even try to adequately hold individual Wall Street bank executives accountable has deeply eroded trust in equal justice under the law.

Just in case you haven’t yet figured out how America works.

• EU Court: Google Must Remove Certain Links on Request (WSJ)...  people have right to be forgotten on Internet (Reuters)
• Harsh weather: German Investor Confidence Drops for Fifth Straight Month (BBG)
• More harsh weather: China Slowdown Deepens (BBG)
• Harsh weather as far as the eye can see: China’s New Credit Declines (BBG)
• "Alien" artist, surrealist H.R. Giger dies aged 74 (Reuters)
• Pfizer urges AstraZeneca to talk as UK lawmakers slam offer (Reuters)
• Property sector slowdown adds to China fears (FT)
• Russia says EU sanctions will hurt Ukraine peace efforts (Reuters)
• U.S. Considers Relaxing Crude Oil Export Restrictions (WSJ)
• Yellen Wage Signals Showing Slack May Be Missing Cost Speedup (BBG)
• Investors bet on BoE acting to ease property market and raise rates (FT)
• Lehman Trade a Gift That Keeps Giving for Paulson to King Street (BBG)
• Attorney General Holder Tightens the Squeeze on Banks (WSJ)
• The Secret Brazil Happy Meal McDonald’s Keeps Under Wraps (BBG)
• All-Madrid Soccer Final Soured by $2,000 Hotels in Portugal (BBG)

Overnight Media Digest

WSJ

* AT&T Inc is close to sealing a takeover of DirecTV that could value the satellite-television provider at about $50 billion. The two sides are discussing a deal that would involve a mix of cash and AT&T stock. An agreement could be reached in two weeks if not sooner, people familiar with the matter said. (http://r.reuters.com/dyg39v)

* Pfizer Inc laid out a case for its proposed $106 billion takeover of AstraZeneca PLC in documents sent on Monday to two U.K. parliamentary committees. For the first time, Pfizer said that its five-year commitments to the U.K. - made 10 days ago as part of an unsolicited takeover bid of $84.26 a share - were legally binding. AstraZeneca rejected the offer, saying the proposal substantially undervalued the company. (http://r.reuters.com/hyg39v)

* Hillshire Brands Co agreed to buy Pinnacle Foods Inc for $4.3 billion in a bet that mixing hot dogs and frozen cakes with pickles, syrup and salad dressing will add up to a more appetizing business. The deal, announced on Monday, would create a company with about $6.6 billion in annual revenue and a broad array of brands including Hillshire's namesake lunch meats, Jimmy Dean sausages and Ball Park hot dogs. (http://r.reuters.com/jyg39v)

* Several major advertisers, including MasterCard Inc , Mondelez International and Verizon Wireless in the past year have moved a portion of the money they previously spent on television to online outlets, conscious that viewers are more frequently watching video online. And with online outlets in recent weeks unveiling plans to ramp up their programming, more shifts are likely, say media buyers. (http://r.reuters.com/nyg39v)

* London Stock Exchange Group PLC has emerged as a contender for Russell Investments, the stock-index and asset-management business that is on the auction block. The U.K. stock-exchange operator is among a small group of late-stage bidders for Russell, which Northwestern Mutual Life Insurance Co officially put on the auction block early this year. (http://r.reuters.com/ryg39v)

* Citizens Financial Group Inc filed for an initial public offering with the Securities and Exchange Commission on Monday. In the filing, Citizens said the number of shares to be offered and the price range for the proposed deal haven't yet been determined. However, it plans to raise up to $100 million in the offering. (http://r.reuters.com/wyg39v)

* Federal prosecutors asked a judge for a stiff sentence of more than five years in prison for Michael Steinberg, a former senior employee of SAC Capital Advisors LP convicted of insider trading last year. Steinberg, who is free on bail, is scheduled to be sentenced Friday in federal court in Manhattan. (http://r.reuters.com/zyg39v)

* Becker Drapkin Management LP, an activist investor that targets smaller companies, has taken a 7.2 percent stake in XO Group Inc, according to a regulatory filing on Monday. The investment fund supports XO Group's recently named Chief Executive Michael Steib but is raising questions about the continued operational role of co-founder and Chairman David Liu and losses piling up under Liu's watch in China. (http://r.reuters.com/cah39v)

FT

The United States and its leading European allies are mulling wider sanctions on the Russian economy along with a ban on the export of high-tech energy equipment, if Moscow is seen disrupting Ukraine's presidential elections on May 25.

British law makers will demand "cast iron" guarantees from U.S. drug maker Pfizer on jobs and investment for up to 10 years if it buys AstraZeneca.

Citizens Financial Group Inc, the U.S. unit of Britain's Royal Bank of Scotland, filed with U.S. regulators for an initial public offering of common stock that would raise about $100 million.

AT&T Inc is in active talks to buy satellite TV provider DirecTV and may finalise a deal in the next few weeks that could be worth close to $50 billion, according to people familiar with the matter.

The head of KPMG in the Netherlands resigned on Monday, the accounting firm said, less than a month after authorities launched a criminal investigation into alleged tax fraud at a venture it set up to build a new Dutch headquarters.

NYT

* With TransCanada's Keystone XL pipeline snarled in a regulatory and legal struggle south of the border, Canadian oil companies are proposing many new and expanded pipelines that would connect the oil sands fields with new markets in China and across the world. The planned projects that would snake east and west as well as south, could break the virtual United States monopoly market for Canadian oil exports. (http://r.reuters.com/qyg39v)

* A string of departures from the Fed's seven-member board over the last year has left the central bank on the verge of operating with just three governors for the first time in its 100-year history. Three nominees are awaiting Senate confirmation, but so are scores of nominees to other offices. (http://r.reuters.com/syg39v)

* AT&T is in talks to buy DirecTV for at least $50 billion, and the two sides are actively working toward an announcement. If completed, the deal would give AT&T, the country's second-largest wireless carrier, control of the country's largest satellite television provider, further reshaping the rapidly changing telecommunications and television industries. (http://r.reuters.com/vyg39v)

* Rejecting an unusual $50 billion unsolicited bid, Allergan , the maker of Botox, said its best days were ahead of it and signaled it would consider making acquisitions of its own as it worked to stay independent. Allergan said the offer by Valeant Pharmaceuticals and William Ackman "substantially undervalues Allergan and is not in the best interests of the company and its stockholders." (http://r.reuters.com/xyg39v)

* Pfizer Inc pledged on Monday to keep jobs in Britain if it succeeds in taking over British drug maker AstraZeneca Plc, and it questioned whether AstraZeneca can stand on its own much longer. Pfizer's chief executive is expected to appear before a parliamentary committee in London on Tuesday as the American pharmaceutical giant tries to convince British lawmakers that a Pfizer-AstraZeneca combination is viable. (http://r.reuters.com/bah39v)

* Toyota said on Monday that it would allow a battery-supply deal with Tesla Motors to expire this year and would focus instead on building cars running on hydrogen fuel cells, a next-generation technology that rivals Tesla's all-electric systems. (http://r.reuters.com/gah39v)

* Since the financial crisis, the annual meetings of Wall Street banks have become focal points for shareholder anger about foreclosures, taxpayer bailouts and income inequality. While gadflies and social activists have flocked to shareholder meetings across corporate America for decades, banks' annual meetings can be quite contentious. (http://r.reuters.com/hah39v)

Canada

THE GLOBE AND MAIL

* Railway company Montreal, Maine & Atlantic Railway Ltd and three of its employees will be charged with criminal negligence in connection with a train accident on July 6 last year, according to the Quebec prosecutor's office. The devastating accident occurred after a train hauling volatile crude oil broke free from its brakes and ran down a hill into the small town of Lac-Mégantic, causing a massive explosion and killing 47 people. (http://r.reuters.com/pyj39v)

* Rob Ford and his brother Councillor Doug Ford's role in helping a client of their family firm gain access to top city executives has renewed calls for investigative action against them. Toronto's integrity commissioner suspended investigations this month after Rob Ford announced he was going to rehab. (http://r.reuters.com/ryj39v)

Reports in the business section:

* AutoCanada Inc, which is playing a leading role in consolidation of Canada's automobile dealerships, is poised to shake up the Calgary market with its purchase of Hyatt Automotive Group. (http://r.reuters.com/wyj39v)

NATIONAL POST

* The political fortunes of the Parti Québécois are getting worse and worse, with support now at a historic low. One month after its crushing electoral defeat to the Liberals, a new poll shows that, had an election been held on May 7-8, support for the party would have been a mere 19 percent. (http://r.reuters.com/xak39v)

FINANCIAL POST

* The housing boom has not only resulted in record real estate prices, it has spawned an unprecedented number of real estate agents. Toronto had 35,000 real estate agents in December 2012 which has grown to 39,000 this year. Much of it is an influx of speculative careers from would-be real estate agents who see a quick buck to be made - up to 5 percent of the house price - that comes with it. (http://r.reuters.com/jak39v)

* Canada's aboriginals have threatened to go to court if Prime Minister Stephen Harper approves the Alberta-to-West Coast oil pipeline next month, and if he does, to sabotage the project if proponent Enbridge Inc dares to build it. (http://r.reuters.com/pak39v)

Britain

The Telegraph

SCOTLAND FACES RISK OF CAPITAL FLIGHT, WARNS DEUTSCHE

An independent Scotland faces the risk of "capital flight" if it cannot strike a deal to keep the pound, Europe's largest investment bank, Deutsche Bank, has warned. (http://link.reuters.com/heg39v)

VINCE CABLE URGED TO PROTECT ASTRAZENECA

Members of the Business Select Committee will on Tuesday demand that Vince Cable tightens Britain's takeover rules to protect AstraZeneca from a possible 63 billion pound hostile bid from Pfizer. (http://link.reuters.com/jeg39v)

The Guardian

PFIZER SAYS UK JOBS PLEDGE LEGALLY BINDING

Pfizer has said it will keep its promises about retaining high-skill jobs and manufacturing in Britain as the U.S. firm's boss prepares to face questions from MPs on the proposed takeover of AstraZeneca. (http://link.reuters.com/keg39v)

ANNUAL RETAIL SALES GROWTH SLOWS, DESPITE BOOST FROM EASTER PERIOD

Retailers enjoyed an Easter boost in sales last month but it was not enough to prevent the worst underlying performance for more than a year. The British Retail Consortium's monthly report suggested sales were up 4.2 percent on a like-for-like basis in April on a year earlier as bank holiday shoppers bought furniture and snapped up clothing to suit the warmer weather. (http://link.reuters.com/meg39v)

The Times

BSKYB FACES HOSTILE RECEPTION TO PAY-TV TALKS WITH SKY ITALIA AND DEUTSCHLAND

BSkyB, Britain's largest pay-TV company, is in talks to buy Sky Deutschland and Sky Italia, in deal estimated at 10 billion euro. (http://link.reuters.com/seg39v)

BUSINESS LEADERS ECHO PUBLIC DISTRUST OF PFIZER'S 63 BLN STG BID

The public overwhelmingly opposes Pfizer's takeover of AstraZeneca, according to polls, showing the scale of the challenge faced by the U.S. drugs company in overcoming doubts about its 63 billion pound offer. (http://link.reuters.com/peg39v)

Sky News

CITY STAR WOODFORD TO MEET PFIZER BOSS READ

London-based prominent fund manager Neil Woodford will meet the boss of Pfizer this week for talks about the U.S. pharmaceuticals giant's proposed 63 billion pound takeover of AstraZeneca. (http://link.reuters.com/reg39v)

CARLYLE TESTS APPETITE FOR 1 BLN STG DENTAL CHAIN

Integrated Dental Holdings, UK's largest privately owned dental chain, will either be put up for sale or floated on the stock market by private equity firm Carlyle Group LP. (http://link.reuters.com/qeg39v)

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Retail sales for April at 8:30--consensus up 0.4% from prior month
Import price index for April at 8:30--consensus up 0.3% from prior month
Business Inventories for March at 10:00--consensus up 0.4%

ANALYST RESEARCH

Upgrades

Bridgepoint Education (BPI) upgraded to Hold from Sell at Deutsche Bank
Danone (DANOY) upgraded to Equal Weight from Underweight at Morgan Stanley
Hub Group (HUBG) upgraded to Buy from Hold at KeyBanc
KKR (KKR) upgraded to Overweight from Equal Weight at Evercore
Masco (MAS) upgraded to Buy from Hold at Jefferies
QIAGEN (QGEN) upgraded to Neutral from Underweight at HSBC
Time Warner (TWX) upgraded to Outperform from Market Perform at Bernstein

Downgrades

BE Aerospace (BEAV) downgraded to Neutral from Overweight at JPMorgan
Baker Hughes (BHI) downgraded to Market Perform from Outperform at Bernstein
Carmike Cinemas (CKEC) downgraded to Hold from Buy at Topeka
Concho Resources (CXO) downgraded to Hold from Buy at Wunderlich
Douglas Emmett (DEI) downgraded to Market Perform from Outperform at Wells Fargo
Electrolux downgraded to Neutral from Buy at Longbow
Endeavour (END) downgraded to Neutral from Buy at SunTrust
Hillshire Brands (HSH) downgraded to Neutral from Overweight at JPMorgan
Nabors Industries (NBR) downgraded to Market Perform from Outperform at Bernstein
Pinnacle Foods (PF) downgraded to Hold from Buy at Stifel
Safeguard Scientifics (SFE) downgraded to Equal Weight from Overweight at First Analysis
Whirlpool (WHR) downgraded to Neutral from Buy at Longbow

Initiations

City Office REIT (CIO) initiated with a Buy at Janney Capital
Global Cash Access (GCA) initiated with a Hold at Stifel
Grainger (GWW) initiated with an Overweight at Morgan Stanley
HD Supply (HDS) initiated with an Equal Weight at Morgan Stanley
WESCO (WCC) initiated with an Equal Weight at Morgan Stanley
Watsco (WSO) initiated with an Equal Weight at Morgan Stanley

COMPANY NEWS

Pfizer (PFE) said possible offer for AstraZeneca (AZN) represents compelling holder value
Elizabeth Arden (RDEN) reported a significant miss on Q3 results and said it has engaged Goldman Sachs (GS) to explore potential strategic alternatives. The company also implemented a broad restructuring and cost savings progam, targeting annual savings of $40M-$50M upon full implementation of the program
CEMEX (CX) said CEO Lorenzo Zambrano passed away
Halozyme Therapeutics (HALO) reported Q1 results that narrowly missed expectations and announced that the Data Monitoring Committee now supported enrollment in the company's PEGPH20 study
Vantiv (VNTV) agreed to acquire Mercury Payment Systems from Silver Lake for $1.65B
magicJack (CALL) reported quarterly revenues below analyst estimates and said it activated 196,000 subscribers during Q1

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Cubic (CUB), Installed Building Products (IBP), Ophthotech (OPHT), Encana (ECA), Synergy Pharmaceuticals (SGYP), Sunshine Heart (SSH), Elbit Systems (ESLT), Wix.com (WIX), DFC Global (DLLR), Supernus (SUPN), Thompson Creek (TC), Atlantic Power (AT), Endeavour Silver (EXK), CorEnergy (CORR), American Apparel (APP), InnerWorkings (INWK), LipoScience (LPDX), Esperion Therapeutics (ESPR), Convergys (CVG), magicJack (CALL), Aerie Pharmaceuticals (AERI), Everyday Health (EVDY), Engility Holdings (EGL), McKesson (MCK), Premier (PINC), Trovagene (TROV), Rackspace (RAX)

Companies that missed consensus earnings expectations include:
CST Brands (CST), Surgical Care Affiliates (SCAI), Resolute Energy (REN), Consolidated Water (CWCO), Arc Logistics (ARCX), Odyssey Marine (OMEX), Health Insurance Innovations (HIIQ), Fuel Tech (FTEK), Elizabeth Arden (RDEN), Capitala Finance (CPTA), TG Therapeutics (TGTX), Cardiome (CRME), American Midstream Partners (AMID), Apricus Biosciences (APRI), Halozyme (HALO), ADMA Biologics (ADMA), Unilife (UNIS), Fontegra Financial (FRF), Omeros (OMER), Puma Biotechnology (PBYI), Parametric Sound (HEAR), Lifeway Foods (LWAY), Virtusa (VRTU), Penn Virginia (PVA), Hannon Armstrong (HASI), Kindred Biosciences (KIN), DealerTrack (TRAK), Orion Energy (OESX), Rockwell Medical (RMTI), Cara Therapeutics (CARA), Onconova (ONTX), Portola Pharmaceuticals (PTLA), Acorn Energy (ACFN), 2U (TWOU), Arena Pharmaceuticals (ARNA), PDL BioPharma (PDLI), Continental Building (CBPX)

Companies that matched consensus earnings expectations include:
Babcock & Wilcox (BWC), Cytori Therapeutics (CYTX), Towerstream (TWER), Spark Networks (LOV), Osiris (OSIR)

NEWSPAPERS/WEBSITES

AT&T (T) in talks to buy DirecTV (DTV) for approximately $100 per share, Bloomberg says 
Credit Suisse (CS) tax evasion settlement might exceed $2B, Reuters says
DOJ, AG Holder may reach multibillion-dollar settlements with banks (CS, BAC), WSJ reports
Sony (SNE) may ditch OLED TVs for 4K LCD sets, Nikkei reports
EA (EA) executives, including COO, recently sold almost $5M in stock, Re/code reports
Google (GOOG) must remove certain links if requested, EU court says, WSJ reports
Facebook (FB) said to be looking to open China sales office, Bloomberg reports
Pfizer (PFE) says too early to discuss U.S. AstraZeneca (AZN) impact, Bloomberg says

SYNDICATE

Antero Resources (AR) files to sell 10M shares for holder
Concho Resources (CXO) 6.5M share Secondary priced at $129.00
Daqo New Energy (DQ) files to sell 2M American Depositary Shares
ExamWorks (EXAM) files to sell 3.1M shares of common stock
GTx (GTXI) files to sell $150M of common stock, warrants
Gramercy Property Trust (GPT) files to sell 34M shares of common stock
MDC Partners (MDCA) files to sell 3.5M class A suborinate voting shares for CEO
Northstar Realty (NRF) 30M share Spot Secondary; price range $15.40-$15.60
ONEOK Partners (OKS) files to sell 11M common units for limited partners
SVB Financial (SIVB) files to sell 3.9M shares of common stock

• Vietnam mobs set fire to foreign factories in anti-China riots (Reuters)
• Recession-Baby Millennials Scarred by U.S. Downturn Spurn Stocks (BBG)
• U.S. Agents Start Hunting for Sanctioned Russians’ ‘Shiny Toys’ (BBG)
• China Central Bank Calls for Faster Home Lending in Slump (BBG)
• Russia moves to oust US from International Space Station (FT)
• Geithner Must Give S&P Documents in U.S. Fraud Suit (BBG)
• Samsung's 'crown prince' in focus as father hospitalized (Reuters)
• Yahoo buys mobile 'self-destruct' messaging app Blink only to shut it down (Reuters)
• Goldman’s Twitter banker joins hedge fund (FT)
• Keyword being "unexpectedly": Sony Unexpectedly Forecasts Loss Amid PC Restructuring Costs (BBG)
• Nigerian Militant Makes a Name for Himself Through Terror (WSJ)
• Florida MERS patient sat in busy ER for hours (Reuters)
• Art Basel Beckons Billionaires With $10,000 Passports (BBG)
• Sears Explores Options, May Sell Canada Stores Stake (BBG)
• Goldman to Citigroup Miss World’s Worst Selloff in China (BBG)
• In Modi's India, a case of rule and divide (Reuters)

Overnight Media Digest

WSJ

* Thousands more victims of Bernard Madoff's Ponzi scheme could receive compensation for their losses. The early findings of a new claims process administered by the Justice Department said the large number of claims suggests the fraud was even bigger than previously known. (http://r.reuters.com/hup39v)

* Chinese authorities on Wednesday accused GlaxoSmithKline Plc's former China chief Mark Reilly of ordering subordinates to commit bribery. Officials with China's Ministry of Public Security said Reilly allegedly pressed his sales teams to bribe hospitals, doctors and health institutions. (http://r.reuters.com/qup39v)

* Pershing Square Capital Management LP on Tuesday called for a non-binding referendum among Allergan shareholders on whether the company should negotiate to sell itself to Valeant Pharmaceuticals International Inc. The move comes a day after Allergan rejected the $46 billion stock-and-cash offer that Valeant made last month. (http://r.reuters.com/sup39v)

* The Federal Reserve warned it may need to take additional action to rein in banks' funding of corporate takeovers after observing continued deterioration of lending standards this year. The Fed and the Office of the Comptroller of the Currency told banks in March 2013 to avoid funding takeover deals that would leave companies with high levels of debt. (http://r.reuters.com/xup39v)

* Radio giant Cumulus Media Inc and Nashville record company Big Machine Label Group have entered into an unusual joint venture called Nash Icons, which will feed radio stations across the country stage-related events such as concerts and television specials. (http://r.reuters.com/zup39v)

* Anthony Noto, a Goldman Sachs Group Inc investment banker who helped shepherd Twitter Inc's initial public offering, is leaving the firm to join Coatue Management LLC, a hedge fund. (http://r.reuters.com/byp39v)

* Christie's in New York made auction history on Tuesday when it sold $745 million worth of contemporary art in less time than it takes to watch a basketball game. The auction house's total surpassed its $691.6 million landmark sale last November and reset records for artists like Alexander Calder and Barnett Newman, whose black-and-tan abstract, "Black Fire I," sold for $84.2 million. (http://r.reuters.com/tup39v)

FT

Shadow chancellor Ed Balls said the British government needed to rein in the Help to Buy scheme in London or risked endangering recovery.

U.S. drug maker Pfizer Chief Executive Ian Read admitted before British lawmakers that a merger with AstraZeneca would mean job losses and reduced research spending.

U.S. internet giants including Google are preparing for a plethora of requests from European citizens to remove sensitive personal information after a landmark ruling by the European Court of Justice.

Goldman Sachs Group Inc technology investment banker Anthony Noto, who helped orchestrate Twitter's IPO last year, is leaving and joining hedge fund Coatue Management.

Weak data releases on both sides of the Atlantic were largely ignored as a positive session for global equities saw the S&P 500 break above 1,900 for the first time and European stocks reach six-year highs.

NYT

* Treasury Secretary Jacob Lew pushed China on Tuesday to let market forces decide its exchange rate, and pressed senior officials here not to undercut the Obama administration's sanctions on Russia. (http://r.reuters.com/hep39v)

* Governor Andrew Cuomo of New York last month appointed a three-person commission to offer thoughts on the use of technology in schools. Eric Schmidt, executive chairman of Google, is one of the three, but his appointment raised some eyebrows as Schmidt's company has a commercial interest in seeing more Chromebook computers, which run Google's Chrome web software, and the company's productivity applications, Google Apps, being used in schools. (http://r.reuters.com/fep39v)

* Europe's highest court said on Tuesday that people had the right to influence what the world could learn about them through online searches, a ruling that rejected long-established notions about the free flow of information on the Internet. A search engine like Google should allow online users to be "forgotten" after a certain time by erasing links to web pages unless there are "particular reasons" not to, the European Court of Justice in Luxembourg said. (http://r.reuters.com/pep39v)

* Subsys, a strong painkiller, was approved in 2012 for cancer patients, but has since become an outsize moneymaker for Insys Therapeutics and has been prescribed more widely. Drug-safety experts said the range of medical professionals who appeared to be prescribing Subsys was troubling, particularly given concerns about the widespread use - and abuse - of narcotic painkillers. (http://r.reuters.com/vep39v)

* The federal overseer of Fannie Mae and Freddie Mac on Tuesday announced a shift in policies intended to maintain the mortgage finance giants' role in parts of the housing market, spur more home lending and aid distressed homeowners. Melvin Watt's announcement raises bigger - and divisive - questions about the role of the now-profitable mortgage institutions, which were fully taken over by the federal government during the financial crisis to avoid their bankruptcies. (http://r.reuters.com/gup39v)

* Airbnb, the popular apartment-sharing service, won a legal standoff Tuesday when a state judge ruled that the company did not have to give up customer records as part of an investigation by the New York attorney general. However, the victory may be short-lived, as the state attorney general said he would address the court's concerns in a new subpoena. (http://r.reuters.com/dup39v)

* Being cast off from a struggling foreign parent company might bring on an identity crisis for some institutions. Not so for Citizens Bank, which is looking to turn its coming independence from the Royal Bank of Scotland into an opportunity to strengthen its consumer banking in the United States. But it may be a slog. (http://r.reuters.com/nup39v)

* Sallie Mae, the student lender, and Navient, its former subsidiary, have agreed to pay $97 million to settle complaints about excessive fees and interest on loans to military service members. (http://r.reuters.com/pup39v)

* As the drugstore chain Walgreen considers a deal that would allow it to reincorporate abroad, many shareholders are elated, saying it could save millions of dollars a year on taxes. But at least one Walgreen investor wants the company to remain in the United States. The CtW Investment Group, which owns less than 1 percent of Walgreen's shares, sent a letter on Tuesday to the company's management, making the case against such a transaction. (http://r.reuters.com/kup39v)

Canada

THE GLOBE AND MAIL

* Canada's House of Commons passed the divisive Fair Elections Act by a vote of 146 to 123, despite ongoing calls for changes. The new law will boost ID requirements on voting day and place limits on what Elections Canada can do publicly. (http://r.reuters.com/myq39v)

* A conflict-of-interest probe involving Rob Ford should continue even if the mayor is not at City Hall, say two veteran members of city council. Integrity commissioner Janet Leiper suspended her investigation of the mayor this month after Ford took a leave to seek help for alcohol abuse. (http://r.reuters.com/nyq39v)

Reports in the business section:

* BlackBerry Ltd launched a low-cost touchscreen device in Jakarta, the Z3, as the embattled smartphone-maker looks to revive sales in emerging markets like Indonesia. The handset is the first in a line of devices being made with FIH Mobile Ltd, a unit of the giant Taiwanese Foxconn Technology Group. (http://r.reuters.com/qyq39v)

NATIONAL POST

* In what appears to be the deepest discount in Canadian history on a floating rate loan, Investors Group is rocking the mortgage world with a deal that takes the effective mortgage rate down to 1.99 percent. The company is now offering 101 basis points or 1.01 percentage points off its prime rate of 3 percent for a variable rate mortgage. (http://r.reuters.com/syq39v)

* In the latest weirdly expensive anomaly to hit the Vancouver housing market, a $3-million house in Vancouver that sold in just 24 hours will be torn down by its new owners. The four-bedroom house at 3981 West 35th Avenue will demolished because its new owners consider it too small. (http://r.reuters.com/tyq39v)

FINANCIAL POST

* A ruling by Europe's top court ordering Google Inc to remove some personal data on request is a landmark decision which solidifies an individual's right to be forgotten online. The Court of Justice of the European Union's surprise decision does not set a formal legal precedent for Canada, but it will be "persuasive", said Geoff White, counsel for the Public Interest Advocacy Centre. (http://r.reuters.com/vyq39v)

* The British-Columbia government is optimistic that at least one liquefied natural gas project will secure a final investment decision by the end of the year. However, a Petronas Bhd executive says his company is seeking regulatory certainty from the province before it proceeds with its multi-billion dollar project. (http://r.reuters.com/xyq39v)

Hong Kong

SOUTH CHINA MORNING POST

-- Macau casinos will be handed a deadline to get rid of illegal China UnionPay mobile swipe card devices or face a crackdown on the city's multimillion-dollar illegal cash-transfer business, gaming insiders say. (link.reuters.com/xyn39v)

-- Wang Dongming, the chairman of Citic Securities , China's largest brokerage firm by market value, has been fined two months' salary after publicly reprimanding state-owned Industrial and Commercial Bank of China for racking up huge profits. (link.reuters.com/cap39v)

-- Last year's double-digit percentage growth in the number of mainland tourists had a limited impact on the Hong Kong hospitality industry. However, the decrease in their numbers this year poses a challenge to the business, hoteliers said. (link.reuters.com/dap39v)

THE STANDARD

-- Upgraders who buy partially built property could soon have up to three years to sell their old homes to enjoy the double stamp duty rebate, which might help boost developers' sales, according to a proposed amendment scheme presented by the government. (link.reuters.com/fap39v)

-- Declining demand and use of the mainland currency in Hong Kong has prompted China Construction Bank (Asia) and Wing Hang Bank to boost the maximum interest they offer on yuan time deposits. (link.reuters.com/gap39v)

-- Hysan Development said first-quarter sales at shops in Lee Gardens, Hysan Place and the Lee Theatre rose 20 percent from a year back, beating the 4 percent growth of the entire retail sector in the period. (link.reuters.com/hap39v)

HONG KONG ECONOMIC JOURNAL

-- Footwear distributor S. Culture International Holdings Ltd expects slower retail sales growth in the second quarter of 2014 compared to a 27 percent same-store sales growth in the first quarter, according to senior management.

HONG KONG ECONOMIC TIMES

-- The relaxation of double stamp duty is set to ease burden of home upgraders, said Swire Properties Chief Executive Officer Martin Cubbon, adding the cooling measure is set to stay until the market sees an increase in supply and as interest rate goes up.

MING PAO DAILY NEWS

-- Mainland railway equipment manufacturer China CNR Corp Ltd plans to issue 1.82 billion H shares in an initial public offering in Hong Kong, raising up to HK$11.3 billion ($1.46 billion).

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS
Domestic economic reports scheduled today include:
Producer Price Index for April at 8:30--consensus up 0.2%

ANALYST RESEARCH

Upgrades

Akamai (AKAM) upgraded to Outperform from Sector Perform at Pacific Crest
Autodesk (ADSK) upgraded to Buy from Hold at Canaccord
CalAmp (CAMP) upgraded to Overweight from Equal Weight at First Analysis
Harmony Gold (HMY) upgraded to Overweight from Neutral at JPMorgan
Lear (LEA) upgraded to Buy from Hold at Deutsche Bank
MannKind (MNKD) upgraded to Neutral from Underweight at Piper Jaffray
Pandora (P) upgraded to Outperform from Market Perform at Raymond James
Royal Caribbean (RCL) upgraded to Buy from Neutral at SunTrust
Rubicon Project (RUBI) upgraded to Outperform from Perform at Oppenheimer
Rubicon Project (RUBI) upgraded to Outperform from Sector Perform at RBC Capital
Summit Hotel (INN) upgraded to Outperform from Sector Perform at RBC Capital
Western Digital (WDC) upgraded to Overweight from Equalweight at Barclays

Downgrades

Randgold Resources (GOLD) downgraded to Neutral from Overweight at JPMorgan
Sibanye Gold (SBGL) downgraded to Neutral from Overweight at JPMorgan
Sociedad Quimica (SQM) downgraded to Underperform from Neutral at Credit Suisse
Teekay Tankers (TNK) downgraded to Underperform from Neutral at BofA/Merrill

Initiations

Ashford Hospitality Prime (AHP) initiated with an Outperform at JMP Securities
Avago (AVGO) resumed with a Buy at Deutsche Bank
Camtek (CAMT) initiated with a Buy at B. Riley
Cascade Microtech (CSCD) initiated with a Buy at B. Riley
Cohu (COHU) initiated with a Buy at B. Riley
IMS Health (IMS) initiated with a Buy at BofA/Merrill
IMS Health (IMS) initiated with a Buy at Deutsche Bank
IMS Health (IMS) initiated with a Buy at Mizuho
IMS Health (IMS) initiated with a Buy at Stifel
IMS Health (IMS) initiated with a Neutral at Goldman
IMS Health (IMS) initiated with an Equal Weight at Morgan Stanley
IMS Health (IMS) initiated with an Equalweight at Barclays
IMS Health (IMS) initiated with an Outperform at Leerink
IMS Health (IMS) initiated with an Overweight at JPMorgan
IMS Health (IMS) initiated with an Overweight at Piper Jaffray
Intersil (ISIL) initiated with an Overweight at Evercore
InvenSense (INVN) initiated with an Outperform at Imperial Capital
MWI Veterinary Supply (MWIV) initiated with a Buy at UBS
Nielsen (NLSN) initiated with an Overweight at Barclays
ON Semiconductor (ONNN) initiated with an Underweight at Evercore
Ultratech (UTEK) initiated with a Neutral at B. Riley
Vipshop (VIPS) initiated with a Buy at Brean Capital

COMPANY NEWS

Sears (SHLD) exploring strategic alternatives for 51% interest in Sears Canada
Google (GOOG) said Google Glass now available to U.S. consumers for $1,500
BHP Billiton (BHP) reviewing Western Australian Nickel West business
Yahoo (YHOO) acquired Blink, a mobile messaging application that lets users share self-destructing messages
Hertz (HTZ) backed its FY14 guidance and said it would delay its 10-Q filing
Take Two (TTWO) reported Q4 results that beat analyst expectations, but guided below analyst estimates for Q1
Arotech (ARTX) said its quarterly results beat analyst estimates
Fossil (FOSL) provided Q2 guidance below analyst estimates

EARNINGS

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

Coty (COTY), InterOil (IOC), Top Image Systems (TISA), Banro Corporation  (BAA), World Point Terminals (WPT), SunOpta (STKL), China Lodging Group (HTHT), Corium (CORI), Five9 (FIVN), Cyclacel Pharmaceuticals (CYCC), Inogen (ingn), Amber Road (AMBR), Rubicon Project (RUBI), Aratana Therapeutics (PETX), NetSol Technologies (NTWK), Electro Scientific (ESIO), Take-Two (TTWO), Fossil (FOSL), Summer Infant (SUMR), Epizyme (EPZM), pSivida (PSDV)

Companies that missed consensus earnings expectations include:

Full House Resorts (FLL), GasLog (GLOG), Cimatron (CIMT), VimpelCom (VIP), NMI Holdings (NMIH), Galectin Therapeutics (GALT), First Majestic (AG), Argos Therapeutics (ARGS), StoneCastle (BANX), Marrone Bio (MBII), URS Corporation (URS), YuMe (YUME), Fate Therapeutics (FATE), Synacor (SYNC), Conatus (CNAT), Revance Therapeutics (RVNC), PostRock Energy (pstr), IMRIS (IMRS), Intrawest Resorts (SNOW), Quantum (QTWW), Dicerna (DRNA), Biodel (BIOD), Auspex Systems (ASPX), Bluebird Bio (BLUE)

Companies that matched consensus earnings expectations include:

ARC Group (ARCW), B2Gold (BTG), TriplePoint Venture (TPVG), American Eagle Energy (AMZG), Netlist (NLST)

NEWSPAPERS/WEBSITES

Fortress (FIG) preparing $4.7B bid for Stuyvesant Town, Bloomberg says 
Google's (GOOG) operations could be disrupted by EU's 'right to be forgotten' ruling, WSJ reports
JPMorgan (JPM) buys $2B in Argentina bonds from Repsol (REPYY), Bloomberg reports
Sony (SNE) says OLED development not on pause, What Hi-Fi? reports
NY regulator cooperation crucial to deals with BNP (BNPQY), Credit Suisse (CS), WSJ says
Whirlpool (WHR) still a buy, Barron's says
Vodafone (VOD) sidelined as AT&T (T) looks to DirecTV (DTV), Bloomberg reports

SYNDICATE

Antero Resources (AR) 12M share Secondary priced at $62.00
Delek US (DK) files to sell 9.2M shares of common stock for holders
Hydrogenics (HYGS) files to sell common stock for holders
NXP Semiconductors (NXPI) to sell 17.38M shares of common stock for holders
SVB Financial (SIVB) 3.9M share Secondary priced at $101.00
ServisFirst (SFBS) 625K share IPO priced at $91.00
Shore Bancshares (SHBI) files to sell 3M shares of common stock
Spirit Realty (SRC) files to sell 23M shares of common stock and convertible notes
TechTarget (TTGT) files to sell 5M shares of common stock for holders
USA Compression (USAC) files to sell 6.6M common units representing limited partners

Submitted by Martin Armstrong via Armstrong Economics blog,

• McDonald’s Workers Arrested at Protest Near Headquarters (BBG)
• U.S. Sends Troops to Chad to Hunt for Abducted Nigeria Girls (BBG)
• BofA Scrapping Market-Making Unit Amid Trading Scrutiny (BBG)
• Biggest attack in years kills 31 in China's troubled Xinjiang (Reuters)
• Intense Fighting Flares in Eastern Ukraine (WSJ)
• Fed Officials Tussle Over Labor Market Slack (Hilsenrath)
• Ikea Economics Lure Central Bankers Seeking New Tools (BBG)
• When Putin ordered up new hospitals, his associates botched the operation (Reuters)
• Norway’s $33 Billion Man Steps Up Search in Asia Real Estate Bet (BBG)
• New Faces Behind Fed Dots Seen Roiling Markets as Forecasts Move (BBG)
• Good luck: Vietnam threatens to sue China (Reuters)
• Tony Hayward, Ex-BP CEO, Gets His Life Back as Kurdish Pipeline Opens (BBG)
• JD.com Raises $1.78 Billion, Pricing IPO Above Range (BBG)

Overnight Media Digest

WSJ

* Federal Reserve Chairwoman Janet Yellen has argued consistently in recent months that labor markets are abundant with slack that will hold inflation and wages down. But she hasn't convinced all her colleagues. Minutes of the Fed's April 29-30 policy meeting showed a lengthy debate on this subject and suggested labor-market slack will become an important battleground in the central bank's coming discussions about how long to continue its low-interest-rate policies. (http://r.reuters.com/pyj59v)

* Goldman Sachs Group Inc is ceding most of its ground on the New York Stock Exchange's trading floor. IMC Financial Markets, a Dutch high-speed trading firm, agreed on Wednesday to acquire Goldman's rights to operate as a designated market maker in more than 600 New York Stock Exchange-listed stocks, according to Scott Knudsen, IMC's Chicago-based head of trading. IMC will also hire about 15 floor brokers from the Wall Street firm. (http://r.reuters.com/tyj59v)

* Reynolds American Inc and Lorillard Inc are in advanced talks to combine in a deal that would dramatically reshape the U.S. tobacco landscape, creating a powerful No. 2 to industry leader Altria Group Inc, according to a person familiar with the matter. (http://r.reuters.com/vyj59v)

* The claws are out for the entire board of Darden Restaurants Inc after it agreed last week to sell its Red Lobster chain. Starboard Value LP, an activist investor that didn't want Darden to sell Red Lobster alone, is now launching a fight to take over the board, according to people familiar with the matter. (http://r.reuters.com/xyj59v)

* EBay Inc on Wednesday asked the 145 million registered users of its namesake marketplace to change their passwords following a cyber attack that compromised a database containing encrypted passwords and other data. (http://r.reuters.com/zyj59v)

* Three days after AstraZeneca PLC slammed the door on Pfizer Inc's latest $120 billion takeover offer, some big investors in the British drugs giant are refusing to give up. AstraZeneca's sixth-largest investor, Legal & General Group PLC, is urging the company's board to reverse its rejection of the deal, two people familiar with the situation said. (http://r.reuters.com/fak59v)

FT

The Financial Conduct Authority succeeded in overturning a lower court decision on UK legal aid. The Court of Appeal ruled that a complex fraud trial could go ahead despite defendants being unable to find legal representation.

Shareholders in Italy's Monte dei Paschi di Siena approved a proposal to boost the size of an upcoming share sale to 5 billion euros ($6.9 billion) to help it absorb a hit on its finances it expects from a Europe-wide bank health check.

Hedge fund Magnetar Capital is suing U.S. drugs wholesaler McKesson Corp, saying its acquisition of German peer Celesio was unfair to minority shareholders.

Tesco Plc, UK's biggest grocer, banned sweets and chocolates from checkouts in all of its stores as health campaigners crack down on sugary food items.

Netflix is pushing into Europe this year, the U.S. video streaming company said on Wednesday, as the company launches its service in Germany, France, Belgium, Switzerland and Austria by the end of 2014.

NYT

* China is going to great lengths to satisfy its growing hunger for energy to fuel its expanding car fleet and electrify its swelling cities. The Chinese government showed that desire on Wednesday when it reached a 30-year natural gas deal with Russia, even as China was locked in a tense standoff with Vietnam over a Chinese oil rig drilling in the contested South China Sea. (http://r.reuters.com/quj59v)

* JD.com Inc, an online retailer aspiring to become China's answer to Amazon.com Inc, exceeded expectations for its initial public offering on Wednesday, raising $1.78 billion. Even though the company has lost money for the last several years, its stock sale valued the company at $25.7 billion, a valuation even higher than Twitter Inc's at its market debut last fall. (http://r.reuters.com/tuj59v)

* One of the prime assets that the estate of the bankrupt Lehman Brothers Holdings Inc still has to sell is a 20 percent stake in the $22 billion hedge fund D. E. Shaw. But so far, Lehman has found no takers. Over the last six months, the Lehman estate has been trying to drum up interest in the stake, which the Wall Street bank bought a year before it collapsed. But few investment firms solicited by the Goldman Sachs Group Inc bankers who are shopping it have shown much interest in what is one of the industry's more successful trading firms. (http://r.reuters.com/zuj59v)

* Airbnb, the apartment sharing service, and New York law enforcement officials came to an agreement Wednesday after a dispute over rental data that lasted for the better part of a year. Under the terms of the deal, Eric Schneiderman, the New York State attorney general, will get the information he is seeking about Airbnb hosts in New York City, but it will be stripped of names and other personally identifiable information. (http://r.reuters.com/byj59v)

* Investment firm Starboard Value is seeking to unseat Darden Restaurants Inc's entire 12-member board, people briefed on the matter said on Wednesday. The move comes after the restaurant operator announced plans last week to sell Red Lobster to Golden Gate Capital, a private- equity firm, for about $2.1 billion. Both Starboard and another hedge fund, Barington Capital Group, fiercely criticized the deal as a "firesale" that shortchanged them and other investors. (http://r.reuters.com/cyj59v)

Canada

THE GLOBE AND MAIL

* Ontario's New Democratic Party Leader Andrea Horwath is expected to promise a family caregiver tax credit when she unveils her platform Thursday morning. The credit, which would provide C$1,275 annually to people caring for an ill or aging family member at home, is part of Horwath's attempt to position the NDP as the party of the "middle class," in a bid to broaden its base of support. (http://r.reuters.com/wam59v)

* In his first address to the National Assembly as Quebec's premier, Philippe Couillard warned tough times are ahead as Quebec seeks to put its financial house in order. In the end, the sacrifice will pay off though with more jobs and lower taxes, he promised. (http://r.reuters.com/bem59v)

Reports in the business section:

* The single biggest customer for the new Bombardier Inc C Series airplane, Republic Airways Holdings Inc, is raising doubts about whether it still wants the aircraft, another potential blow to Bombardier's attempt to carve out a profitable niche in the biggest segment of the large commercial airplane market. (http://r.reuters.com/fem59v)

NATIONAL POST

* After weeks of speculations, former Federal Minister Jim Prentice announced his intention to replace Alison Redford as the Leader of the Progressive Conservative Association of Alberta, and Premier of Alberta. (http://r.reuters.com/hem59v)

* Canadian Prime Minister Stephen Harper feared he might have to step aside in 2008 if a police investigation occurred into allegations his Conservative team had tried to bribe Independent Member of Parliament Chuck Cadman, a new book says. (http://r.reuters.com/kem59v)

FINANCIAL POST

* Chief Executive of Malaysia's Petroliam Nasional Bhd said the state-run energy giant will not proceed with a planned liquefied natural gas export terminal proposed for Canada's West Coast at all costs, even as the company eyes a potential final investment decision on the plant by year-end. (http://r.reuters.com/mem59v)

* As the list grows of investment dealers rejecting compensation awards recommended for their clients by Canada's independent banking ombudsman, an investor advisory panel is calling on the Ontario Securities Commission to step in and make the compensation binding. (http://r.reuters.com/nem59v)

Hong Kong

SOUTH CHINA MORNING POST

-- Mainland internet giant Tencent Holdings Ltd emerged as the world's fastest-growing brand this year and surpassed China Mobile as the most valuable in Asia, according to the latest BrandZ Global Top 100 study. (link.reuters.com/syh59v)

-- Advertising spending is going mobile, with a recent research report showing Chinese consumers are more receptive of mobile advertising than those in Britain and the United States. The report forecasts China's mobile advertising will reach 12.5 billion yuan ($2.01 billion) this year and swell to 25.7 billion yuan in 2017. (link.reuters.com/tyh59v)

-- The maiden flight of China's first large commercial passenger jet, the C919, has been delayed until the end of next year, with planes expected to be delivered to buyers in 2018, a senior official at its state-owned manufacturer Commercial Aircraft Corp of China said. (link.reuters.com/vyh59v)

THE STANDARD

-- The MTR Corp said part of the construction work for the South Island Line East is delayed, in another embarrassing admission by the railway operator. (link.reuters.com/wyh59v)

-- A bill to exempt the Macau chief executive from criminal liability during his term of office will be passed into law in Macau next week - after it sailed through a committee at Macau's Legislative Assembly on Wednesday. (link.reuters.com/zyh59v)

-- China Everbright said its state-owned parent China Everbright Group is waiting for the State Council to approve an internal restructuring ahead of a listing of the whole group. (link.reuters.com/caj59v)

HONG KONG ECONOMIC JOURNAL

-- Demand for service apartment with monthly rental of over HK$100,000 ($12,900) is seen weakening in Hong Kong as many international corporations trim their overseas staff housing subsidies, and that boost demand for smaller apartment with monthly rental of HK$80,000, according to real estates service firm Jones Lang LaSalle.

HONG KONG ECONOMIC TIMES

-- U.S. apparel brand J.Crew, which opened three stores in London last year as it kicked off its overseas expansion plan, has recently opened two stores in Hong Kong's Central business district and it plans to add three more in the city in the next two years to tap the local market, according to its Chief Executive Millard Drexler.

MING PAO DAILY NEWS

-- Hong Kong-based watch retailer Oriental Watch Holdings Ltd said it expects to report a "substantially lower profit" for the year ended March 2014 due to a slowdown in China economy and an increase in shop rents, while high-end luxury menswear retailer Trinity Ltd saw no improvement in operating environment in China due to the ongoing anti-corruption campaign.

Britain

The Telegraph

BP WILL TAKE GULF OF MEXICO ROW TO SUPREME COURT

(http://link.reuters.com/dej59v)

The British oil major said on Wednesday that it would ask the United States' highest court to revise a catch-all compensation deal it struck in 2012, which is being used to award payouts to people "with no apparent connection to the Deepwater Horizon spill".

HALFORDS ACCUSED OF SQUEEZING SUPPLIERS

(http://link.reuters.com/fej59v)

Letters seen by The Telegraph show Halfords Group asking suppliers to pay up to 10 percent of their annual sales with the retailer in what effectively amounts to a rebate on already agreed contractual payments.

The Guardian

ASTRAZENECA DIRECTORS UNMOVED BY SHAREHOLDER CALLS TO REOPEN PFIZER TALKS

(http://link.reuters.com/hej59v)

AstraZeneca's directors remained defiant on Wednesday night in the face of calls from one of the drugs company's biggest shareholders to reopen talks with its unwanted suitor, the U.S.-based Pfizer group.

TIMING OF MORTGAGE RATE RISE LOOKS LESS CERTAIN AFTER BANK OF ENGLAND MEETING

(http://link.reuters.com/jej59v)

The prospect of a rise in mortgage rates next spring looks more uncertain after Bank of England policymakers appeared to be split over when to end the UK's five years of cheap credit.

The Times

WE'RE WATCHING YOU, CARNEY TELLS INSURERS

(http://link.reuters.com/taj59v)

The governor of the Bank of England has warned insurers that he will hold their top executives to account in the same way that he has cracked down on Britain's errant bankers.

BANK'S UNITED FRONT OVER RATE RISE BEGINS TO CRACK

(http://link.reuters.com/kej59v)

All nine members of the Monetary Policy Committee voted in favour of keeping rates on hold this month, but the minutes of the meeting showed that, for some, the policy decision was becoming "more balanced".

Sky News

FAT FACE PULLS FLOAT AS CITY IPO FASHION FADES

(http://link.reuters.com/tuh59v)

Fashion retailer Fat Face <IPO-FFFL.L> is expected to abandon its planned flotation in a move that could mark a turning point in the City's frenzy of recent company listings.

BUYOUT GIANTS TEAM UP FOR SUB-PRIME LENDER

(http://link.reuters.com/xeh59v)

Two of the world's biggest private-equity groups Blackstone and TPG have joined forces to mount a takeover bid for Kensington, one of the UK's biggest specialist mortgage lenders.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Jobless claims for week of May 17 at 8:30--consensus 310K
Markit manufacturing PMI for May at 9:45--consensus 55.5
Leading indicators for April at 10:00--consensus up 0.4%
Existing home sales for April at 10:00--consensus up 2.2% to 4.69M rate

ANALYST RESEARCH

Upgrades

Booz Allen (BAH) upgraded to Buy from Hold at Stifel
Facebook (FB) upgraded to Overweight from Equal Weight at Evercore
Nabors Industries (NBR) upgraded to Buy from Hold at Jefferies
Reinsurance Group (RGA) upgraded to Outperform from Market Perform at Raymond James
Renasant (RNST) upgraded to Outperform from Market Perform at Keefe Bruyette

Downgrades

American Eagle (AEO) downgraded to Sell from Neutral at Citigroup
ArcelorMittal (MT) downgraded to Sell from Neutral at Goldman
Arcos Dorados (ARCO) downgraded to Neutral from Overweight at HSBC
Keurig Green Mountain (GMCR) downgraded to Neutral from Buy at Roth Capital
MedAssets (MDAS) downgraded to Neutral from Buy at BofA/Merrill
Mosaic (MOS) downgraded to Neutral from Outperform at Macquarie
Motorola Solutions (MSI) downgraded to Underperform from Neutral at Mizuho
STMicroelectronics (STM) downgraded to Underweight from Neutral at HSBC
SodaStream (SODA) downgraded to Underweight from Equalweight at Barclays

Initiations

AES Corp. (AES) initiated with an Equal Weight at Morgan Stanley
AT&T (T) initiated with a Market Perform at Bernstein
CF Industries (CF) initiated with a Neutral at UBS
CenturyLink (CTL) initiated with a Market Perform at Bernstein
China Biologic (CBPO) initiated with a Buy at Jefferies
First Quantum Minerals (FQVLF) initiated with an Underweight at HSBC
Frontier Communications (FTR) initiated with a Market Perform at Bernstein
Seabridge Gold (SA) initiated with a Speculative Buy at Canaccord
Sprint (S) initiated with a Market Perform at Bernstein
T-Mobile (TMUS)initiated with a Market Perform at Bernstein
Verizon (VZ) initiated with an Outperform at Bernstein
Windstream (WIN) initiated with an Outperform at Bernstein

COMPANY NEWS

Unilever (UN, UL) agreed to sell Ragu, Bertolli brands to Mizkan Group for $2.15B
Sears (SHLD) said it continues to evaluate options to separate Sears Auto Center business
Allergan (AGN) responded to Pershing that it is 'well aware of its fiduciary duties'
The Consumer Product Safety Commission announced that Nest Labs (GOOG) would recall 440,000 smoke alarms to repair a feature can prevent the alarm from immediately sounding
Sanchez Energy (SN) said it would acquire 106K continuous net acres in Eagle Ford trend of South Texas from wholly-owned subsidiaries of Royal Dutch Shell (RDS.A) for approximately $639M in cash
LINN Energy (LINE) signed a definitive agreement to trade a portion of its Permian Basin properties to Exxon Mobil (XOM) and its wholly owned subsidiary XTO Energy for operating interests in the Hugoton Basin
China Precision Steel (CPSL) announced delisting from NADSAQ

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Toronto-Dominion (TD), Sinovac Biotech (SVA), Bristow Group (BRS), Weibo (WB), L Brands (LB), Williams-Sonoma (WSM), Spartan Stores (SPTN), Synopsys (SNPS), 8x8, Inc. (EGHT), Rexnord (RXN), NetApp (NTAP)

Companies that missed consensus earnings expectations include:
Sears (SHLD), 58.com (WUBA), SINA (SINA), Aegean Marine (ANW), Westell Technologies (WSTL)

Companies that matched consensus earnings expectations include:
Royal Bank of Canada (RY), ValueVision (VVTV)

SINA (SINA) sees Q2 adjusted revenue $177M-$182M, consensus $197.74M
Williams-Sonoma (WSM) sees FY14 EPS $3.07-$3.17, consensus $3.17
Williams-Sonoma (WSM) sees Q2 EPS 49c-52c, consensus 55c
NetApp (NTAP) sees Q1 EPS 53c-58c , consensus 62c

NEWSPAPERS/WEBSITES

Lorillard (LO) in advanced talks to be acquired by Reynolds (RAI), Reuters reports (BTI)
General Motors (GM recalls over 238,000 cars in Brazil, Telegraph reports
Sony (SNE) says not thinking about quitting TV business, Reuters reports
Goldman Sachs (GS) to sell NYSE floor trading business to IMF Financial, WSJ reports
Starboard Value to launch proxy board to take over Darden  (DRI) board, WSJ reports
Bank of America (BAC) will abandon electronic market-making unit, Bloomberg reports
SEC investigates Schwab (SCHW), Merrill (BAC) on anti-money laundering controls, Reuters says
GM (GM) expects to release investigation, compensation plan simultaneously, AP says

SYNDICATE
Activision Blizzard (ATVI) announces sale of 41.5M shares of common by Vivendi
American Realty (ARCP) 120M share Secondary priced at $12.00
CDW Corporation (CDW) files to sell 15M shares of common stock for holders
JD.com (JD) 93.686M share IPO priced at $19.00
JGWPT Holdings (JGW) files to sell 18.4M shares of common stock for holders
Monmouth Real Estate (MNR) 7M share Secondary priced at $8.50
Post Holdings (POST) 5.5M share Secondary priced at $47.70
RLJ Lodging Trust (RLJ) files to sell 7.5M common shares of beneficial interest
TechTarget (TTGT) 5M share Secondary priced at $6.25
Terreno Realty (TRNO) files to sell 6.5M shares of common stock

Submitted by Chris Martenson via Peak Prosperity,

The US shale oil "miracle" has about as much believability left as Jimmy Swaggart. Just today, we learned that the EIA has placed a hefty downward revision on its estimate of the amount of recoverable oil in the #1 shale reserve in the US, the Monterey in California.

As recently as yesterday, the much-publicized Monterey formation accounted for nearly two-thirds of all technically-recoverable US shale oil resources.

But by this morning? The EIA now estimates these reserves to be 96% lower than it previously claimed.

Yes, you read that right: 96% lower. As in only 4% of the original estimate is now thought to be technically-recoverable at today's prices:

EIA Cuts Monterey Shale Estimates on Extraction Challenges

May 21, 2014

 

The Energy Information Administration slashed its estimate of recoverable reserves from California’s Monterey Shale by 96 percent, saying oil from the largest U.S. formation will be harder to extract than previously anticipated.

 

“Not all reserves are created equal,” EIA Administrator Adam Sieminski told reporters at the Financial Times and Energy Intelligence Oil & Gas Summit in New York today. “It just turned out it’s harder to frack that reserve and get it out of the ground.”

 

The Monterey Shale is now estimated to hold 600 million barrels of recoverable oil, down from a 2012 projection of 13.7 billion barrels, John Staub, a liquid fuels analyst for the EIA, said in a phone interview. A 2013 study by the University of Southern California’s Global Energy Network, funded in part by industry group Western States Petroleum Association, found that developing the state’s oil resources may add as many as 2.8 million jobs and as much as $24.6 billion in tax revenues.

(Source)

From 13.7 billion barrels down to 600 million.  Using a little math, that means the hoped for 2.8 million jobs become 112k and the $24.6 billion in tax revenues shrink to $984 million.

The reasons why are no surprise to my readers, as over the years we've covered the reasons why the Monterey was likely to be a bust compared to other formations. Those reasons are mainly centered on the fact that underground geology is complex, that each shale formation has its own sets of surprises, and that the geologically-molested (from millennia of tectonic folding and grinding) Monterey formation was very unlikely to yield its treasures as willingly as, say, the Bakken or Eagle Ford.

But even I was surprised by the extent of the downgrade.

This takes the Monterey from one of the world's largest potential fields to a play that, if all 600 million barrels thought to be there were brought to the surface all at once, would supply the US' oil needs for a mere 33 days.

Yep. 33 days.

And along with that oil come tremendous water demands, environmental, infrastructure and air pollution damages.

So if you do go for it California, the rest of the country will be your best buddy for a little more than 4 weeks. But don't keep calling us afterwards, as we'll be off to the next oil party (if there are any other ones to be had). But know that, sure, we still respect you.

Of course I'm being sarcastic here. But if I lived over or near a shale formation, I would be putting up a hell of a fight to prevent the many long-term damages and airborne pollutants that inevitably accompany such short-lived fracking operations.

At this point, you might be wondering just how the EIA got its estimate so badly wrong. The answer is that the EIA relied on a private firm, one now scraping corporate relations and PR egg off its face:

U.S. officials cut estimate of recoverable Monterey Shale oil by 96%

May 20, 2014

 

Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California's vast Monterey Shale deposits, deflating its potential as a national "black gold mine" of petroleum.

 

Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said.

 

The new estimate, expected to be released publicly next month, is a blow to the nation's oil future and to projections that an oil boom would bring as many as 2.8 million new jobs to California and boost tax revenue by $24.6 billion annually.

 

The 2011 estimate was done by the Virginia engineering firm Intek Inc.

 

Christopher Dean, senior associate at Intek, said Tuesday that the firm's work "was very broad, giving the federal government its first shot at an estimate of recoverable oil in the Monterey Shale. They got more data over time and refined the estimate."

(Source)

Wait a minute. The 2011 California shale oil estimate that launched a flotilla of excited "shale miracle" headlines, led the EIA to publish an estimate of the Monterey at 13.7 billion recoverable barrels, and helped to form a national narrative around potential US "energy independence" was done by a Virginia engineering firm?

Okay, well who are they exactly?

Looking at their website, clearly put together using cheesy stock photos, early Internet font formats, and touting the fact that they've been a business "since 1998" doesn't quite project the hoped-for aura of gravitas and seasoned competency:

(Source)

Seriously? A clock in an arch? Typing fingers? A woman gesturing in a meeting and a guy on a phone?

I mean, does anyone other than me have a "no lame stock photos" requirement of the businesses they use to generate the data used to justify a major geopolitical energy realignment? It's the closest thing I have to a hard rule.

Okay, just kidding again....sort of.

At any rate, the bottom line here is that the EIA relied on this firm's back-of-the-envelope calculations which turned out to be -- surprise! -- unreliable. And now, Occidental Petroleum is scrambling to get its assets out of the Monterey and deployed somewhere more promising.

The lesson to be learned here is: don't believe every headline you read. Consider the source, and more importantly -- stock photos or not -- always question the data.

Price, It's Always About Price

However, I cannot completely write off the entire 96% as 'gone' because the media has left off the most important part, as they always do: the role of price.

Without having access (yet) to the latest well data to know exactly what sort of potential disaster we're dealing with, the correct way to write-down an oil resource is to say: at today's oil prices, this asset can yield (or is worth) $X.

At higher prices, it is certainly true that more of the resource will be 'worth' going after.

But as you and I know, the price mechanism is just a means of obscuring the most important variable: the net energy that will be returned from a given play. Generally speaking, the higher the price (which is often a function of the energy required to extract), then the less net energy will come from that play.

So anytime we hear that a given play is being 'written down', as the Monterey is in rather spectacular fashion, what's really being said is that the net energy from the play is a lot less than prior and/or existing plays, and will not be useful to us until higher oil prices come along. In the case of the Monterey, much higher prices.

Whether we have an intact, functioning and highly complex economy of the sort necessary to develop and deliver the technology required to prosecute such low-yielding plays is another matter entirely. My best guess as of today is, 'probably not.'

Conclusion

Today's write down of the Monterey shale asset is a huge blow to Occidental Petroleum specifically, to California's energy and employment dreams more broadly, and to the US's energy dreams at a national level.

This is not surprising at all to anybody following the shale story with a critical eye. We always knew that the best plays were being prosecuted first for obvious reasons; it's human nature to go after the easy stuff first. And this is especially true for the folks in the oil patch.

The best plays were tapped first, not by some accident of technology or lucky holes plunged into the ground, but because they were cheapest to prosecute. The remaining shale deposits are less rich, more costly to explore, and the profitable pockets much harder to find.

Your main take-away is this: the US has a lot less shale reserves on the books today than it did yesterday. Look for future downward revisions as the other remnant shale plays are poked and prodded and found to be wanting.

Investors need to be wary here too. The hype about shale prospects are wedded to a Wall Street cheap capital machine that is showing clear signs of over-heating:

Shale Drillers Feast on Junk Debt to Stay on Treadmill

Apr 30, 2014

 

Rice Energy Inc. (RICE), a natural gas producer with risky credit, raised $900 million in three days this month, $150 million more than it originally sought.

 

Not bad for the Canonsburg, Pennsylvania-based company’s first bond issue after going public in January. Especially since it has lost money three years in a row, has drilled fewer than 50 wells -- most named after superheroes and monster trucks -- and said it will spend $4.09 for every $1 it earns in 2014.

 

The U.S. drive for energy independence is backed by a surge in junk-rated borrowing that’s been as vital as the technological breakthroughs that enabled the drilling spree. While the high-yield debt market has doubled in size since the end of 2004, the amount issued by exploration and production companies has grown nine-fold, according to Barclays Plc. That’s what keeps the shale revolution going even as companies spend money faster than they make it.

 

“There’s a lot of Kool-Aid that’s being drunk now by investors,” Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management LLC. “People lose their discipline. They stop doing the math. They stop doing the accounting. They’re just dreaming the dream, and that’s what’s happening with the shale boom.”

(Source)

I guess there's a little less dreaming going on in the Monterey shale patch this morning.

Not to pick on RICE here, because they are more typical than not, but when you are spending $4 to earn $1, somebody ought to be asking some hard questions. Especially the investors.

More broadly, I have been clearly concerned by the recent reports indicating that the shale operators have been spending far more in CAPEX than they’ve been generating in operating earnings.

That's a larger subject that I've covered in more detail in recent reports, but the summary is this: over the past four years, free cash flow (FCF) has been negative for most of the major shale players.

Which leads us to the really big question: When will all these shale drilling efforts actually generate positive FCF?

In the case of the Monterey, and at today's prices, the answer looks to be 'Never.'

• Vietnam, China trade accusations after Vietnamese fishing boat sinks (Reuters)
• SEC Set to Spur Exchange Trading (WSJ)
• Bank of Japan quietly eyes stimulus exit (Reuters)
• Japan Risks Low Growth Even as Easing Spurs Inflation (BBG)
• Hello Japan: Bond Market Message to Fed: Your 4% Rate Outlook Is Too High (BBG)
• Malaysia, UK firm release satellite data on missing MH370 flight (Reuters)
• Fighting rages in eastern Ukraine city, dozens dead (Reuters)
• Bad Credit No Problem as Balance-Sheet Bombs Rally 94%  (BBG)
• Draghi’s Asset-Backed Drive Rouses Academic Skeptics (BBG)
• For-Profit Colleges Face Test From State, Federal Officials (WSJ)
• Boutique bank Sterne Agee imploding (AL)
• Euroskeptic election surge gives EU a headache (Reuters)
• Alarm Raised by Plan to Ease Credit Norms on U.S. Parent Loans (BBG)
• How AstraZeneca escaped Pfizer's clutches this time (Reuters)
• As His Foundation Has Grown, Gates Has Slowed His Donations (NYT)

Overnight Media Digest

WSJ

* Top U.S. securities regulators are embracing a plan designed to shift more stock trading onto exchanges and away from private trading venues operated by banks and other firms, according to people familiar with the discussions. The move, which could deliver a blow to bank trading operations, is expected to be part of a coming Securities and Exchange Commission pilot program aimed at boosting trading in the stocks of smaller companies. (http://r.reuters.com/qef69v)

* Pfizer Inc dropped its pursuit of British rival AstraZeneca Plc, leaving both drug makers to overcome aging pipelines and market pressures alone. Pfizer had been chasing AstraZeneca since November in an effort to create the world's biggest pharmaceutical company. (http://r.reuters.com/xef69v)

* Wal-Mart Stores Inc needs a more independent board in order to improve directors' handling of a protracted foreign-bribery probe and executive pay, a prominent proxy adviser said. Institutional Shareholder Services Inc, which advises big shareholders like mutual funds how to vote on corporate ballots, is concerned the company has not disclosed which, if any, of its executives might be found culpable in an investigation into alleged bribery overseas. (http://r.reuters.com/zef69v)

* Intuit Inc has agreed to buy bill-payment service Check Inc. for $360 million, according to two people familiar with the situation. The deal was signed on Friday and the two companies plan to announce it Tuesday, one of the people said. (http://r.reuters.com/buf69v)

* Federal and state officials are conducting probes into for-profit colleges over concerns that schools are marketing career-training programs that lack proper accreditation for students in certain fields, according to government agencies and regulatory filings. (http://r.reuters.com/duf69v)

FT

ECB president Mario Draghi warned that credit constraints were adding to disinflationary pressures in stressed countries, and said weak lending risks were derailing the eurozone's fledgling recovery.

Drugmaker Pfizer officially dropped its bid for UK pharmaceutical giant AstraZeneca on Monday, marking a rare failure for the U.S. company that has made a series of large acquisitions until now.

Rosneft and BP Plc signed an agreement to jointly explore for hard-to-recover oil in Russia, the first major deal for the state-run Russian oil company since the West imposed sanctions over Ukraine in March.

Swedish telecoms equipment maker Ericsson warned that lack of public sector expenditure in next generation networks was resulting in lessening returns on the development the company made in Europe, which is at the risk of falling behind other regions.

Four of Europe's 10 biggest car manufacturers including General Motors, BMW, Fiat and Hyundai would miss carbon dioxide emission reductions targets, and could face penalty according to an report by think-tank Transport & Environment.

NYT

* On the final day for Pfizer Inc to decide whether to abandon the plan, it said it did not intend to make an offer for AstraZeneca Plc. Last week, the British company rejected what Pfizer had called its final offer. The cash-and-stock bid, which valued AstraZeneca at about $119 billion, would have created the world's largest drug company. (http://r.reuters.com/vaf69v)

* In a sign of the growing potential under the federal health care law, several insurers that have been sitting on the sidelines say they will sell policies on the new exchanges in the coming year, and others plan to expand their offerings to more states. (http://r.reuters.com/waf69v)

* Martin Lipton, the superlawyer, has advised hundreds of boards of directors in the midst of crises. Now, however, Lipton is grappling with a board governance crisis of his own. As chairman of New York University's board of trustees, Lipton has been dealing with revelations that the university's much-heralded new campus in Abu Dhabi might have been the product, in part, of rights abuses of foreign laborers. (http://r.reuters.com/xaf69v)

* Bill Gates, who as the richest American has become one of the foremost advocates of philanthropy, has reduced the pace of his own giving to the Bill & Melinda Gates Foundation over the last decade. After starting the foundation with gifts of $356 million from 1994 to 1997, Gates, the co-founder of Microsoft Corp, vastly expanded it into the nation's largest with a burst of gifts totaling $24.6 billion over the next four years. Since then, however, he has dialed back this giving. (http://r.reuters.com/cef69v)

* A law that allows the government to read email and cloud-stored data over six months old without a search warrant is under attack from technology companies, trade associations and lobbying groups, which are pressing Congress to tighten privacy protections. Federal investigators have used the law to view content hosted by third-party providers for civil and criminal lawsuits, in some cases without giving notice to the individual being investigated. (http://r.reuters.com/kef69v)

Canada

THE GLOBE AND MAIL

* Canadian Prime Minister Stephen Harper is under mounting pressure to make the Supreme Court appointment process more transparent and less ideological, after revelations that four of the government's six candidates were from a court that was ultimately ruled ineligible. (http://r.reuters.com/weg69v)

* Toronto Mayor Rob Ford is on the sidelines, but the city's controversial leader remains a strong presence among the candidates who want to replace him, with contenders jockeying for position as the best choice to continue his agenda or move away from it. (http://r.reuters.com/dug69v)

Reports in the business section:

* Rogers Communications Inc's Chief Executive Guy Laurence believes a new cellular carrier would not have the ability to invest in Canada's capital-intensive wireless market and succeed. (http://r.reuters.com/fug69v)

NATIONAL POST

* The Muslim Brotherhood has established a "significant presence" in Canada, says a study released Tuesday that asks whether the government should follow the lead of the United Kingdom and launch an investigation into the group. (http://r.reuters.com/kug69v)

* Fawzi Ayoub was a hijacker, international terrorist operative and senior member of Hezbollah. He was also a naturalized Canadian citizen, but on Monday Lebanese media reported he was dead, killed in an ambush by Syrian rebels. (http://r.reuters.com/mug69v)

FINANCIAL POST

* Canada's construction industry faces a major shakeup in the wake of the proposed merger of cement makers Holcim Ltd and Lafarge SA as the country's competition watchdog eyes forced asset sales that could attract significant interest from bidders. (http://r.reuters.com/qug69v)

* Wal-Mart Stores Inc has confirmed it laid off hundreds of employees across Canada earlier this month in a move to rework its management structure. The retailer said it eliminated 750 jobs, which it says represented less than one per cent of staff, after testing a new management structure in select stores. (http://r.reuters.com/sug69v)

China

CHINA SECURITIES JOURNAL

- The insurance industry's total assets have exceeded 9 trillion yuan ($1.44 trillion) so far, sources close to the China Insurance Regulatory Commission (CIRC) said. Risk management will be a priority for the regulator for the year.

- Investigations of insider trading in the fund management industry should be formalised despite possible shocks to publicly offered funds, the newspaper said in an editorial.

- Moody's Investor Service downgraded its outlook on China's property development sector to "negative" from "stable" amid growing pessimism about the industry among foreign investors.

SHANGHAI SECURITIES NEWS

- The preferred share issuance plan by Shanghai Pudong Development Bank Co Ltd has won shareholders' approval. The fundraising is aimed at supporting its transformation into a large bank and achieving a more balanced structure involving its wholesale, retail and capital businesses.

SECURITIES TIMES

- China's central government published its plans and targets for energy saving for this year and the next. Energy-saving services will be regulated under the "negative list", which explicitly sets business boundaries and opens the gates for a wider range of unlisted companies.

21ST CENTURY BUSINESS HERALD

- New loans of China's "big four" state-owned banks have only reached 130 billion yuan as of May 25, sources said.

CHINA DAILY

- The U.S. Justice Department indicted five individuals of the People' Liberation Army, saying they had hacked into the computers of U.S. companies for the benefit of Chinese state-owned enterprises (SOEs). The act is seen as Washington's attempt to draw a fine line between spying to benefit particular companies, which it regards as illegitimate, and spying to benefit the economy, which it seems to regard as legitimate.

PEOPLE'S DAILY

- As of the first quarter of 2014, 53 SOEs have invested in 685 projects in Xinjiang, with the actual investment amount reaching 590.4 billion yuan.

Britain

The Telegraph

PFIZER BOSS IAN READ HITS BACK OVER ASTRAZENECA

(http://link.reuters.com/hud69v)

Ian Read told the Telegraph that the rules capping drug prices are discouraging investment in Britain, and are "inconsistent" with the government's apparent desire to attract research and development.

LLOYDS POISED TO LAUNCH TSB FLOAT

(http://link.reuters.com/jud69v)

Lloyds Banking Group is poised to fire the starting gun on the highly anticipated stock market flotation of TSB <IPO-TBS.L>, which will try to win the support of retail investors by giving them bonus shares.

The Guardian

VINCE CABLE VOWS GOVERNMENT WILL TACKLE ZERO-HOURS CONTRACT ABUSES

(http://link.reuters.com/kud69v)

The business secretary, Vince Cable, has said the government will tackle abuses of zero-hours contracts once a fuller picture of the number of employers using the controversial labour-hiring system becomes available.

COLES AND WOOLWORTHS URGE DEREGULATION OF RETAIL TRADING HOURS

(http://link.reuters.com/mud69v)

The supermarket giants Coles and Woolworths have called on the federal government to lead the states towards a deregulation of retail trading hours, citing bizarre rules that dictate when a shop can or cannot trade.

The Times

ASTRA PINS HOPES ON TRIALS AFTER PFIZER EXIT

(http://link.reuters.com/pud69v) Pfizer's official declaration that it had withdrawn its offer will shift the spotlight on to Pascal Soriot, the chief executive of AstraZeneca, to justify his reasons for blocking a deal as he is set to attend the unveiling of the trial results of two lung cancer treatments at the American Society of Clinical Oncology this weekend.

TSB SWEETENS THE PILL OF NO DIVIDENDS WITH FREE SHARES

Lloyds Banking Group will promise one free TSB <IPO-TBS.L> share for every 20 bought and held for a year by retail investors as it formally sets out the intention to float announcement.

Sky News

PFIZER WALKS AWAY FROM 69 BLN STG ASTRAZENECA DEAL

(http://link.reuters.com/rud69v)

U.S. firm Pfizer has confirmed it will not make another offer for British pharmaceuticals group AstraZeneca as a deadline expired for it to lodge a formal bid.

BLACKSTONE IN JOINT BID FOR FRIENDS' TAX ARM

(http://link.reuters.com/sud69v)

The private equity giant Blackstone has joined forces with a US-based specialist insurer to table a bid for the tax planning arm of Friends Life, the FTSE-100 financial services group.

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:
Durable goods orders for April at 8:30--consensus down 0.8% for the month
S&P Case-Shiller 20-city composite index for March at 9:00--consensus up 0.7%
FHFA house price index for March at 9:00--consensus up 0.5%
Consumer confidence for May at 10:00--consensus 83.0

ANALYST RESEARCH

Upgrades

AMC Entertainment (AMC) upgraded to Buy from Neutral at B. Riley
Brooks Automation (BRKS) upgraded to Buy from Neutral at B. Riley
Cepheid (CPHD) upgraded to Buy from Hold at Needham
Cinemark (CNK) upgraded to Buy from Neutral at B. Riley
Cisco (CSCO) upgraded to Buy from Hold at Deutsche Bank
Credit Suisse (CS) upgraded to Buy from Hold at Deutsche Bank
Guidewire (GWRE) upgraded to Neutral from Sell at Citigroup
Henkel (HENKY) upgraded to Neutral from Underperform at Credit Suisse
Legacy Reserves (LGCY) upgraded to Neutral from Underweight at JPMorgan
NRG Energy (NRG) upgraded to Conviction Buy from Buy at Goldman
Office Depot (ODP) upgraded to Buy from Neutral at Goldman
Palo Alto (PANW) upgraded to Buy from Neutral at Nomura
Sherritt (SHERF) upgraded to Outperformer from Sector Performer at CIBC
Splunk (SPLK) upgraded to Outperform from Market Perform at Northland
Youku Tudou (YOKU) upgraded to Neutral from Underweight at HSBC

Downgrades

AstraZeneca (AZN) downgraded to Sell from Hold at Societe Generale
Hudbay Minerals (HBM) downgraded to Sector Performer from Outperformer at CIBC
NTELOS (NTLS) downgraded to Hold from Buy at Jefferies
NextEra Energy (NEE) downgraded to Buy from Conviction Buy at Goldman
Oiltanking Partners (OILT) downgraded to Hold from Buy at MLV & Co.
ResMed (RMD) downgraded to Underperform from Market Perform at Northland
Staples (SPLS) downgraded to Sell from Neutral at Goldman

Initiations

Aegerion (AEGR) initiated with a Sell at Goldman
Ares Management (ARES) initiated with a Neutral at Goldman
Ares Management (ARES) initiated with an Outperform at Keefe Bruyette
Ares Management (ARES) initiated with an Overweight at JPMorgan
Burger King (BKW) initiated with an Equal Weight at Morgan Stanley
Gramercy Property Trust (GPT) initiated with a Buy at BofA/Merrill
Oiltanking Partners (OILT) initiated with a Market Perform at Wells Fargo
Papa Murphy's (FRSH) initiated with a Buy at Jefferies
Papa Murphy's (FRSH) initiated with an Outperform at RW Baird
Papa Murphy's (FRSH) initiated with an Outperform at William Blair
Quotient (QTNT) initiated with a Buy at UBS
Sabre (SABR) initiated with a Buy at BofA/Merrill
Sabre (SABR) initiated with a Buy at Deutsche Bank
Sabre (SABR) initiated with a Buy at Goldman
Sabre (SABR) initiated with a Buy at Jefferies
Sabre (SABR) initiated with an Overweight at Morgan Stanley

COMPANY NEWS

Amgen (AMGN) announces FDA approval of Vectibix in combination with FOLFOX
Gentiva Health (GTIV) adopts shareholders rights plan
Pfizer (PFE) confirms it won't bid for AstraZeneca (AZN) after rejection of proposal
BioCryst (BCRX) announces positive results from OPuS-1, a trial of BCX4161
China Automotive (CAAS) announces special dividend of 18c per share
Stoneridge (SRI) to sell wiring business to Motherson Sumi Systems for $65.7M
Willis Group (WSH) acquires 75% controlling stake in Max Matthiessen for $205M

NEWSPAPERS/WEBSITES

Apple (AAPL) asks court to ban nine Samsung products, Re/code says
Bank of America (BAC) found $4B error after Fed wording change, WSJ reports
Barnes & Noble shares could double, Barron's says
Canada looks into GM (GM) crashes amid faulty switch complaints, Reuters says
Credit Swiss (CS) tax case sparks probe of 13 other banks, Bloomberg says
Google (GOOG) considering buying connected camera maker, The Information says
Intuit (INTU) to acquire Check Inc. for $360M, WSJ reports
Sears (SHLD) could drop over 50%, Barron's says
Tyson Foods (TSN) looks appealing, Barron's says
U.S. regulators back plan to shift trading onto exchanges, WSJ reports

Ten days ago, some of the more confused fringes of the blogosphere took great offense at our repost of an article showing thousands of idle cars strewn around various ports, dealer lots, parkings, airports and any other flat surface in what is merely the world's largest ongoing manufacturing channel stuffing and working capital gimmick.

Amusingly, the most vocal critics were primarily offended by the photos which they said, correctly, were from several years ago. What the critics apparently did not do, as we will gladly demonstrate in a follow up article as soon as GM's dealer inventory numbers are released next week, was to do a quick parallel image search because all those same venues clogged to the brim with unsold cars, and whose addresses were explicitly laid out for anyone willing to do 30 seconds of work and plugging the address into Google earth for an updated aerial photo, are just as crowded today as they were in any point over the past 5 years.

The far bigger point, obviously, is that there are millions of cars clogging up the supply chain of automotive delivery - both then and now - which is precisely why we started off with the topic of GM's record channel stuffing...

... something we have been following keenly for the past three years, and of which lots parked with brand new cars around the world is merely a manifestation of the same underlying problem: namely massive inventory mismanagement, and an attempt to affect pricing through working capital goosing.

To this point we could have clarified that what is going on around the world with various car makers stuffing unsold cars in every possible nook and cranny - certainly including transit ports and continuing all the way down the supply chain and far from it - is nothing different than what Goldman and Glencore were doing with their cartel-like abuse of commodity warehousing (which has now attracted even the Fed's attention), which as we showed earlier this month were at or above 700 days delivery for aluminum respectively, in what is simply an attempt to induce artificial supply shortages by keeping intermediate product from its final destination. That we didn't is because our regular readers are familiar with this topic.

Sadly most others were not.

However, the one fair criticism is that to get a truly detailed picture of just how horrific the channel stuffing problem across the US auto manufacturers, one described quite effectively by Bloomberg in its recent article "Most Autos on U.S. Lots Since ’05 Has Ford Leading Cuts", what we should have done is show aerial picture of dealer lots of local car makers such as GM, Ford and (Italy's) Chrysler which are the fullest they have been in a decade. We hope to update our photo narrative with just that soon.

And in lieu of that, instead here is a verbal account of precisely what happens when domestic car-makers overestimate the purchasing power of the US, and clog channels to an epic extent. In this case, we refer to the recently launched GM Cadillac ELR, launched to much aplomb just five months ago as a competitor to the Tesla Model S for a $76,000 price point (above Tesla's $70,000), has been a complete disaster. And how is GM dealing with this latest sales disappointment (which struck even before all the recent recall scandals had hit)? Why by jamming dealers with an unprecedented 725-day supply, or exactly two years worth of cars!

So what is GM forced to do now? The same thing every vendor does when realizing they have overproduced a product and have too much in inventory - liquidate.

From MarketWatch:

The Cadillac ELR has been on sale for just five months, but General Motors is now offering dealers a $5,000 incentive to offer test drives in the Chevrolet Volt-based plug-in hybrid. To receive the incentive, dealers have until June 2 to designate ELRs in their current inventory as test vehicles, after which each test car has to log a minimum of 750 test-drive miles.

 

The incentives could be because 1,700 ELR coupes remained unsold in dealer inventories at the end of April. At current sales rates, that’s a 725-day supply, which is almost exactly two years’ worth of cars.

The discounts and incentives don't end there:

General Motors is also offering $3,000 in customer discounts toward the lease or purchase of an ELR, in addition to the 240-volt Level 2 home charging station with included installation that was offered to a number of early buyers this year. We noted in January that a Level 2 charger typically sells for north of $750 excluding installation, so a number of ELR buyers essentially received a $1,000 value with the purchase of an ELR.

Curious why the US economy had a mini manufacturing and inventory stockpiling boom in late 2013? Precisely due to cases like the ELR:

General Motors told Automotive News that the Detroit-Hamtramck plant that builds the ELR has been producing a higher volume of cars since the beginning of the year, which could explain the nearly two-year stockpile; industry analysts keep pointing to the price, which is twice that of the Chevrolet Volt. The ELR starts at $75,995 including destination, but before the application of discounts and state and federal credits.

And here we get a paradox:

General Motors, by its own admission, did not intend the ELR to be a volume seller in the lineup.

In other words, a car that was not supposed to be a volume seller, had its production volume cranked up to the max just to stimulate economic activity by building up inventory. And then it hit a snag: "However, it appears that the price continues to keep a lot of customers away."

So yes, while those lots filled to the brim we showed were not of ELR models, they should have been. Unfortunately stock photos of this brand new car sitting untouched on dealer premises are unavailable, at least for now. They will be in due course, unless of course GM is forced to take far more drastic price writedowns and offer much more generous incentives to move the excess inventory - incentives which will bite right into GM's bottom line.

Which really is the bottom line, pun intended: if those thousands of cars held for "inventory stocking" purposes - and nobody knows just what specific intent management has to park thousands of cars idle in plots around the country, not us, not our critics, except that it is an explicit attempt to throttle the supply chain and artificially boost prices (think diamonds) - were to be forced into the broader market and sold at clearing prices, there would suddenly be no epic inventory glut. But far more importantly it would lead to a collapse in car prices as suddenly car supply exploded and dealers were forced to apply the same liquidation methods to all their models as they are doing to the ELR right now.

Finally, since the company under discussion in this post is GM, the same company whose quality control track record has been destroyed following a recall of 50% more cars so far in 2014 than it sold in 2013, expect to see many more stories about exploding channel stuffing for all of its brands, not just the car that was - erroneously - thought would become Government Motors' own Tesla killer.

• Yellen Concerned by Housing Slowdown She Has Scant Power to Cure (BBG)
• Because snow in Q1? Citigroup’s CFO Says Trading Revenue Could Slide 25% (BBG)
• Banks Raise Caution Flag on Trading (WSJ)
• The answer is yes: Hilsenrath asks if BOJ’s Kuroda Awakening to His Limits? (WSJ)
• Google Develops Prototype Cars for Fully Autonomous Driving (WSJ)
• Amazon Expects Lengthy Hachette Dispute (WSJ)
• Ukraine Faces Hurdles in Restoring Its Farming Legacy (NYT)
• Tencent $1 Billion Game Shows Global Hunt for Mobile Hits (BBG)
• GE offer for Alstom has improved, French official says (Reuters)
• More than 50 rebels killed as new Ukraine leader unleashes assault (Reuters)
• To Make a Killing on Wall Street, Start Meditating (BBG)

Overnight Media Digest

WSJ

* Google Inc's co-founder Sergey Brin said it has developed prototype cars for fully autonomous driving. In a promotional video, Google showed off one of the prototypes, a two-seater vehicle that resembles a gondola on wheels. It has no steering wheel, accelerator pedal or brake pedal. Instead, the car relies on its own sensors and software to do the work. (http://r.reuters.com/nan69v)

* General Electric Co is willing to partner with French government in a possible alliance, Chief Executive Jeffrey Immelt told French lawmakers Tuesday as he tried to win their support for the company's $17 billion bid for Alstom SA's power equipment business. (http://r.reuters.com/san69v)

*Pilgrim's Pride Corp swooped in with a $5.5 billion offer for Hillshire Brands Co, maker of Jimmy Dean sausage and Ball Park hot dogs, a surprise bid that could upend Hillshire's plan to expand its supermarket sway by buying Pinnacle Foods Inc. (http://r.reuters.com/van69v)

* After a turbulent few months marked by a management shake-up, lackluster performance and client withdrawals, Pacific Investment Management Co is turning to a familiar face to help soothe nervous investors. The money manager, based in Newport Beach, California, said it had rehired Paul McCulley, a former senior executive. (http://r.reuters.com/wan69v)

* Amazon.com Inc said Tuesday it does not expect a quick resolution of a contract dispute with Hachette Book Group that has led to Amazon restricting the sale of some Hachette titles. (http://r.reuters.com/xan69v)

* Congress should require data brokers to tell consumers more about how they collect and use information and give consumers greater control over their personal data, the Federal Trade Commission said on Tuesday. (http://r.reuters.com/zan69v)

FT

Google could face specially created "cyber courts" as Berlin looks at a range of mechanisms to settle disputes concerning individuals seeking to protect their privacy and search engines.

Spanish government failed to protect citizens from recent housing crash because of which many are left with heavy debts, according to a report by Human Rights Watch, an international non-governmental organization.

Britain's fraud office has launched a formal criminal investigation into GlaxoSmithKline, posing a new challenge to the drugmaker, which already faces claims of bribery in China and four other countries.

Siemens said it was preparing to make an official bid for for Alstom SA, and defeat rival offer by General Electric, in its bid to create two European leaders in power generation and rail.

M&G, the investment unit of Prudential Plc, and ING Investment Management rank among the insurers leading a push in real estate investment as both the companies pump millions into the property market.

NYT

* Restoring Ukraine's farming legacy will be crucial to the success of the country's newly elected president, Petro Poroshenko, as such efforts would go a long way toward fixing Ukraine's economy and reducing its dependence on Russia. (http://r.reuters.com/fym69v)

* The Federal Trade Commission on Tuesday called on Congress to protect consumers against the unchecked collection and sharing of their digital data by providing people with tools to view, suppress and fix their information. (http://r.reuters.com/hym69v)

* Google Inc has begun building a fleet of 100 experimental electric-powered vehicles that will dispense with all the standard controls found in modern automobiles. (http://r.reuters.com/kym69v)

* After Mohamed El-Erian's surprising departure in March, Pimco has now brought back a prominent former executive, Paul McCulley, to help the asset management firm reassure skeptical investors and bolster its intellectual credentials. (http://r.reuters.com/rym69v)

* Since 2000, the Securities and Exchange Commission has sought to ensure equal access to that commodity through a rule known as Regulation FD. The rule generally requires that if a company disclosed material information to one person, it must do so to all. Yet even with that requirement and with the flood of information that is out there, some investors still appear to be getting premier access. (http://r.reuters.com/tym69v)

* The World Bank, a famously bureaucratic institution, is undergoing its first restructuring in nearly two decades. The overhaul is intended to keep it relevant at a time when even the poorest countries can easily tap the global capital markets. (http://r.reuters.com/gen69v)

* A task force convened by the Obama administration issued the most detailed study yet of blight in Detroit on Tuesday and recommended that the city spend at least $850 million to quickly tear down about 40,000 dilapidated buildings. (http://r.reuters.com/hen69v)

Canada

THE GLOBE AND MAIL

* A candidate in the Alberta Progressive Conservative leadership race is promising to change land-use rules that have angered some rural voters. Jim Prentice told the Medicine Hat News that he would rewrite the Land Stewardship Act if he becomes premier and would be more careful about private property rights. (http://r.reuters.com/dep69v)

* Skin cancer, one of the most preventable forms of the disease, is also one of the fastest-rising in Canada, according to a new report from the Canadian Cancer Society that notes the death rate for all cancers combined continues to fall for most age groups. (http://r.reuters.com/cep69v)

Reports in the business section:

* Royal Bank of Canada, the country's largest mortgage lender, is offering real estate agents C$1,000 for referring five first-time home buyers, as competition among banks for first-time buyers has heated up. (http://r.reuters.com/fep69v)

NATIONAL POST

* Toronto Liberal Member of Parliament John McKay was secretly recorded criticizing party leader Justin Trudeau over his edict that prospective MPs must follow the party's pro-choice position on abortion. (http://r.reuters.com/qep69v)

* Councillor Doug Ford indicated on Tuesday that his brother, Toronto Mayor Rob Ford, intends to stay in the mayoral race when he returns from addiction treatment. (http://r.reuters.com/zep69v)

FINANCIAL POST

* It is becoming increasingly difficult for families to own a home in Canada and affordability is expected to get worse going forward, according to the Royal Bank of Canada. (http://r.reuters.com/kup69v)

* Canada's biggest financial institutions have agreed to voluntarily reduce service costs for those that need to save the most following discussions with a federal government eager to push its "consumers-first agenda". (http://r.reuters.com/pup69v)

China

CHINA SECURITIES JOURNAL

- Zhou Xiaochuan, governor of the People's Bank of China (PBOC), said the economy was in an "unusually intricate" situation and local branch offices needed to implement a prudent monetary policy to ensure economic stability and strengthen financial regulation.

- Song Liping, general manager of Shenzhen Stock Exchange, said the exchange would continue to promote and extend China's ChiNext board.

21st CENTURY BUSINESS HERALD

- Miao Jianming, president of China Life Insurance (Group) Co, said the company was going to get licences to start payment, securities and financial services, paving the way for the firm to become a full-fledged financial services company.

SHANGHAI SECURITIES NEWS

- Data from the China Insurance Regulatory Commission showed investments by insurers into stocks and equity funds reached 822 billion yuan ($131.6 billion) in the first four months of this year, accounting for just 10 percent of their total investment portfolio, which is a one-year low.

CHINA DAILY

- The government will release a detailed list of administrative fees for micro-sized and small enterprises as it seeks to alleviate the financial burden of a group of companies that are a source of economic dynamism, an official said on Tuesday.

SHANGHAI DAILY

- Shanghai plans to establish 8-10 smart parks with top-class technologies such as cloud computing and Big Data by 2015 as it looks to lead the sector nationwide, the city's information technology regulator said.

PEOPLE'S DAILY

- Stabilising and developing Xinjiang is the primary goal, the newspaper said in a commentary.

Britain

The Telegraph

BARCLAYS: INDEPENDENT SCOTLAND LIKELY TO GET NEW CURRENCY

(http://link.reuters.com/sam69v)

An independent Scotland would be twice as likely to adopt its own currency as continue using the pound, according to an analysis produced yesterday by Barclays for its investors.

M&S'S SWANNELL HIRED TO OVERSEE GOVERNMENT ASSET SALES

(http://link.reuters.com/tam69v)

Robert Swannell, the chairman of Marks & Spencer and City veteran, has been hired to help the Government speed up the sale of billions of pounds of state assets.

The Guardian

MORRISONS ASKS SUPPLIERS TO PAY FOR PRODUCTS TO MEET REGULATIONS

(http://link.reuters.com/vam69v)

Morrison Supermarkets Plc is asking suppliers to cover the cost of ensuring products meet regulations in the latest of a series of payment demands as the supermarket faces falling profits.

UK CINEMA CHAINS BAN ADS ON SCOTTISH INDEPENDENCE REFERENDUM

(http://link.reuters.com/ram69v)

The UK's major cinema chains have banned all adverts on the Scottish independence referendum after customers inundated them with complaints.

The Times

RIO TINTO CUTS MONGOLIAN MINING JOBS

(http://link.reuters.com/zam69v)

Rio Tinto is planning to cut about 300 jobs from its troubled project in Mongolia, further testing its turbulent relationship with the government.

TSB PARKS ITS TANK ON THE BIG BANKS' LAWN

(http://link.reuters.com/cem69v)

The chief executive of TSB Banking Group <IPO-TBS.L> declared that his company would do more to change the face of high street banking in Britain than any other challenger bank as he set out ambitious expansion plans in the wake of its 1.5 billion pound flotation next month.

Sky News

NATIONWIDE BIG WINNER FROM SEVEN-DAY SWITCH

(http://link.reuters.com/dem69v)

Britain's biggest building society Nationwide will emerge on Wednesday as one of the principal winners from a new system designed to encourage customer mobility when it discloses that it opened more than 420,000 current accounts last year.

MORTGAGE APPROVALS DECLINE FOR THIRD MONTH

(http://link.reuters.com/fem69v)

High street banks have reduced the number of mortgage approvals for the third month in a row, despite their total value reaching a six-year high. The British Bankers' Association said 12.2 billion pounds in loans were activated in April.

Fly On The Wakk 7:00 AM Market Snapshot

ECONOMIC REPORTS
No major domestic economic reports are scheduled today.

ANALYST RESEARCH

Upgrades

Auxilium (AUXL) upgraded to Buy from Neutral at MKM Partners
DreamWorks Animation (DWA) upgraded to Hold from Sell at Topeka
FormFactor (FORM) upgraded to Buy from Neutral at B. Riley
The Pantry (PTRY) upgraded to Outperform from Neutral at Macquarie
Twitter (TWTR) upgraded to Buy from Neutral at Nomura
Vince Holding (VNCE) upgraded to Buy from Hold at KeyBanc
Williams-Sonoma (WSM) upgraded to Overweight from Neutral at Piper Jaffray

Downgrades

Dollar General (DG) downgraded to Hold from Buy at Deutsche Bank
Live Nation (LYV) downgraded to Neutral from Buy at Sterne Agee
Lowe's (LOW) downgraded to Sell from Hold at Canaccord
Nautilus (NLS) downgraded to Neutral from Buy at B. Riley
Vodafone (VOD) downgraded to Hold from Buy at Berenberg

Initiations
Coca-Cola Enterprises (CCE) initiated with a Neutral at ISI Group
Delek US (DK) initiated with a Buy at BofA/Merrill
Nimble Storage (NMBL) initiated with a Neutral at Macquarie
Veeva (VEEV) initiated with an Overweight at JPMorgan
Waste Management (WM) initiated with an Outperform at Imperial Capital

COMPANY NEWS

Valeant (VRX) raises proposal for Allergan by $10.00 per share to $58.30 per share; adds new CVR related to DARPin sales which would provide up to approximately $25.00 per share of additional value
Valeant (VRX) to sell filler, toxin assets to Nestle (NSRGY) for $1.4B in cash
LoJack (LOJN) CFO Donald Peck to leave the company; Casey Delaney named Acting CFO
PetroLogistics (PDH) agrees to be acquired by Flint Hills for $14.00 per unit 
Sanofi (SNY), Eli Lilly announce licensing agreement for Cialis OTC
Workday (WDAY) sees Q2 revenue $173M-$178M, consensus $171.5M
Qihoo 360 (QIHU) sees Q2 revenue $300M-$305M, consensus $270.18M
MiMedx (MDXG) raises lower end of Q2 revenue view to $22.5M-$23.5M from $21.5M-$23.5M
FormFactor (FORM) raises Q2 revenue guidance to $65M-$69M from $62M-$66M
Wet Seal (WTSL) sees Q2 adjusted EPS (9c)-(12c), consensus (4c)

EARNINGS
Companies that beat consensus earnings expectations last night and today include:
Toll Brothers (TOL), Seadrill (SDRL), Qihoo 360 (QIHU), Workday (WDAY)

Companies that missed consensus earnings expectations include:
America's Car-Mart (CRMT)

Companies that matched consensus earnings expectations include:
Wet Seal (WTSL)

NEWSPAPERS/WEBSITES

Apple (AAPL) expected to announce purchase of Beats for $3B this week, NY Post says
Broadcom (BRCM) extends market share to 49% in worldwide STB market, DigiTimes says
Facebook (FB) asks for EU review of WhatsApp deal, WSJ reports
GE (GE) sweetens bid for Alstom with job pledge, Reuters says
Google (GOOG) unveils self-driving car without steering wheel, Re/code reports
Microsoft (MSFT) CEO says not selling search to Yahoo, Re/code reports
Pfizer (PFE) looks like a buy after dropping bid for AstraZeneca, Barron's says
Xerox (XRX) beats out HP for $500M NY Medicaid contract, Bloomberg says

SYNDICATE

3D Systems (DDD) announces offering of 5.95M shares of common stock
ARAMARK (ARMK) launches 20M share common stock offering for holders
BioCryst (BCRX) files to sell $100M in common stock
Brookdale (BKD) announces secondary offering by affiliates of Fortress Investment
Cache (CACH) commences public offering of $14M of common stock
Health Care REIT (HCN) files to sell 1.8M shares of common stock
Installed Building (IBP) files to sell 8.1M shares of common stock for holders
Rexnord (RXN) launches 15M share common stock offering for holders
Strategic Hotels (BEE) commences 34M share common stock offering