• Low Wages Work Against Jobs Optimism (WSJ)
• Tourre’s Junior Staff Defense Seen Leading to Trial Loss (BBG)
• Russia gives Snowden asylum, Obama-Putin summit in doubt (Reuters)
• Fortress to Blackstone Say Now Is Time to Sell on Surge (BBG)
• Brazil backs IMF aid for Greece and recalls representative (FT), previously Brazil refused to back new IMF aid for Greece, says billions at risk (Reuters)
• Google unveils latest challenger to iPhone (FT)
• Swaps Probe Finds Banks Manipulated Rate at Expense of Retirees (BBG)
• Academics square up in fight for Fed (FT)
• Potash Turmoil Threatens England’s First Mine in Forty Years (BBG)
• Dell Deal Close but Not Final (WSJ)
• Corporate Bond Yield Premiums Fall in Europe as Offerings Slow (BBG)
• Apple Stores Glow Less Brightly (WSJ)

Overnight Media Digest

WSJ

* Russia granted asylum to National Security Agency leaker Edward Snowden, defying and embarrassing an Obama administration that threatened to scale back diplomatic relations between the two countries.

* A jury found former Goldman Sachs Group Inc trader Fabrice Tourre liable for misleading investors in a mortgage-linked deal that collapsed during the financial crisis, delivering a big win for the Securities Exchange Commission out to prove its mettle inside the courtroom.

* Intensifying a dispute within his own party, Senate Majority Leader Harry Reid issued a warning on Thursday to Senator Max Baucus, the Democrats' lead tax-law writer in the senate, not to proceed with an overhaul of the tax code unless there is "significant revenue" to be generated from the effort.

* Baxter International Inc investigated a joint venture in China and discovered expense violations there last year. The drug and medical-device maker said it conducted the investigation and "took actions in a prompt and responsible manner" after employees of the venture, Guangzhou Baxter Qiaoguang Healthcare Co, reported problems internally in July 2012. The disclosure comes amid heightened attention on how multinational drug makers sell in China.

* In the wake of the financial crisis, global financial regulators implemented a labyrinth of new rules to constrain banks. Now, regulators in the United States and Europe are starting to conclude the way they currently measure banks' exposure to risk may be too elaborate.

* As Google Inc pushes deeper into hardware, the Internet search giant is pulling Motorola Mobility closer even as it tries to assure device partners that the phone maker won't have an unfair advantage. Google is forming tighter connections with the cellphone maker, even debating whether it could be used to produce products like Google Glass, the company's wearable computer.

* The pain reliever acetaminophen, often sold as Tylenol, can cause rare but serious skin diseases, the Food and Drug Administration said on Thursday. The FDA said that in searching its database of adverse events, it found 107 such cases between 1969 and 2012.

* Sprouts Farmers Market Inc's shares more-than-doubled after the specialty grocery chain's initial public offering, the latest sign of healthy demand for natural-foods retailers. Sprouts' stock rose 123 percent to close at $40.11 on the Nasdaq on Thursday, from an offering price of $18, the largest first-day pop for a U.S.-listed IPO since March 2011.

* Carl Icahn has filed a lawsuit against Dell Inc and its board to prevent the computer maker from further delaying a vote scheduled on Friday or changing the voting rules for a proposed buyout by Michael Dell.

* Chesapeake Energy Corp's shares jumped 7 percent on Thursday to the highest level in more than a year, as the energy producer reported rising oil output and its new chief executive Doug Lawler pledged to close a persistent gap between its spending and cash flow by next year.

FT

Lloyds Banking Group shares rose above the price the government paid for its 21 billion pound ($31.84 billion)stake after the bank swung back to profit in the first half, fuelling hopes that taxpayers would make a profit on the bank's rescue.

Former Goldman Sachs trader Fabrice Tourre was found liable for fraud by a jury for his role in a derivatives deal, following a trial stemming from the financial crisis.

Britain's manufacturing activity grew at its fastest pace in almost two and a half years in July, the purchasing managers index published on Thursday showed.

Britain's top accounting watchdog has decided not to continue with a long-running probe examining the auditing of commissions paid by BAE Systems, claiming it would have to delve too far back into the past.

Tour operator Thomas Cook, which was on the brink of collapse two years ago, cut its net debt and made a profit on an underlying basis in its third quarter.

Ian Andrews has stepped down as chairman of Britain's Serious Organised Crime Agency after failing to register his role as director of a management consultancy.

AIG announced its first dividend and share buyback since the insurer was bailed out in 2008, as the company reported improved results for the second quarter.

NYT

* Fabrice Tourre, the former Goldman Sachs Group Inc trader at the center of a toxic mortgage deal sold to investors, was found liable on six of the seven civil charges against him, giving the Securities Exchange Commission its first significant courtroom victory in a case stemming from the financial crisis.

* President Barack Obama is said to be considering three people to replace Ben Bernanke as Federal Reserve chairman- Lawrence Summers, President Obama's former economic policy adviser; Janet Yellen, the vice chairwoman at the Federal Reserve; and Donald Kohn, a former Fed vice chairman. Summers appears to be the strongest contender.

* Management and financial turmoil has plagued J.C. Penney in recent months, unfolding along with a trial over whether the company could sell Martha Stewart's goods. By this Thursday, when closing arguments for the trial wrapped up, Penney appeared to be in an even worse position, also being forced to dispute reports that lender CIT Group Inc had stopped financing its shipments by small vendors.

* New York's top prosecutor, attorney general Eric Schneiderman is investigating some of the nation's largest banks in connection with their use of credit-reporting databases that disqualify people seeking to open checking or savings accounts - an inquiry that has gained urgency as the ranks of the un-banked has swelled in the aftermath of the financial crisis.

* Regulators are investigating Bank of America Corp and Merrill Lynch as both companies try to move past the problems of the financial crisis. Bank of America disclosed on Thursday that the Justice Department was weighing whether to bring a civil complaint against it over claims that the bank had improperly handled securities backed by jumbo loans.

* American automakers, buoyed this year by robust sales in pickups, said on Thursday that smaller cars and midsize sedans were helping spur growth in the industry to levels not seen since before the recession. Over all, it was the strongest July since 2006 for the industry, with sales rising 14 percent, to 1.3 million vehicles.

* Sony Corp said on Thursday that it was weighing "carefully" shareholder Daniel Loeb's proposal to spin off part of its entertainment arm, but executives said signs of a turnaround in the company's long suffering electronics business showed that their strategy was on track.

* The growth of tests for painkillers has led to concerns about their accuracy and whether some companies and doctors are exploiting them for profit. In 2013, sales at such companies are expected to reach $2 billion, up from $800 million in 1990, according to consulting company Frost & Sullivan.

Canada

THE GLOBE AND MAIL

* The federal investigation into the fatal Lac-Mégantic train derailment and fiery crude oil explosion, after a runaway train carrying 72 cars of crude crashed into the small town's center in early July, has shifted from Quebec to North Dakota, where the oil was drilled, purchased and loaded onto rail cars. A team of investigators was recently dispatched to North Dakota after experts confirmed that the oil reacted "in a way that was abnormal".

* Ontario Premier Kathleen Wynne was dealt a setback in her first electoral test as leader, with the opposition parties chipping away at her government's hold on the province in the by-elections. Progressive Conservatives won in Etobicoke-Lakeshore, giving the party its first seat in Toronto in a decade. But they failed to win any of the other four races.

Reports in the business section:

* TransCanada Corp and Irving Oil Ltd are joining forces to market Canada's crude oil to the world, officially launching the proposed C$12 billion ($11.62 billion) Energy East pipeline and a C$300 million deep-water marine terminal to be built off Saint John, New Brunswick. The pipeline, subject to regulatory approval, promises to unlock new markets for landlocked Western Canadian suppliers by giving them access to eastern refineries and global export markets through ports at Quebec City and Saint John.

* After its second major writedown in just six months, Barrick Gold Corp is trying to woo back shaken investors by focusing on assets closer to home. The world's largest gold miner announced a hefty $8.7 billion after-tax impairment charge, leaving the company with a second-quarter loss of $8.6 billion. In response to the losses, the Toronto-based company plans to shed, suspend or shut high cost mines and continue to cut costs.

NATIONAL POST

* Mayor Rob Ford lost an important ally at City Hall, but gained one at Queen's Park, as Etobicoke-Lakeshore sent Deputy Mayor Doug Holyday to the provincial legislature Thursday. The decision to install a Progressive Conservative in a seat long held by the Liberals is a major Toronto breakthrough for the PC's and a vote of confidence for Mayor Rob Ford, who campaigned tirelessly on behalf of his longtime friend.

* In the hunt for evidence about Senator Mike Duffy, Nigel Wright and a backroom deal struck in the Prime Minister's Office to repay Duffy's expenses, the Royal Canadian Mounted Police has repeatedly tried to glean information from a senior television journalist. CTV Ottawa bureau chief Robert Fife's name appears in a court document filed by the RCMP in June.

* Senator Patrick Brazeau claimed a home he didn't own as his primary residence, didn't stay there even when he visited, and may never have lived there over the last two years, the Royal Canadian Mounted Police (RCMP) allege in court documents made public on Thursday. The RCMP say Brazeau claimed as his primary residence a home his father owns in Maniwaki, Quebec, far enough from Parliament Hill to qualify the senator for a $22,000 a year housing allowance from the Senate.

FINANCIAL POST

* Canada's government has begun a search for investment banks to sell its 10 percent, $5.1 billion stake in General Motors Co, but hasn't decided on the timing of any sale. ()

* Canadian auto sales hit a record in July as cars and trucks continue to fly off dealership lots at a blistering pace in 2013. Chrysler Canada took the sales title in July in this country with sales up 8.4 percent year-over-year during the month to 26,066 units. The Detroit automaker said it was its best July on record, driven by a 20 percent increase year over year in passenger car sales.

China

SHANGHAI SECURITIES NEWS

- China needs to firm up its capital market regulation and avoid the tendency to focus on stringent approval processes, while maintaining light supervision, said Xiao Gang, chairman of the China Securities Regulatory Commission.

- Minsheng Bank has registered an e-commerce subsidiary, according to sources with knowledge of the matter.

- The China Insurance Regulatory Commission will resume granting life insurers approval to open new subsidiaries after a two-year hiatus, potentially benefiting well-capitalized players.

CHINA DAILY

- Shanghai High People's Court on Thursday ordered Johnson & Johnson Medical China Ltd to pay 530,000 yuan ($86,500) to a former dealer for engaging in a monopoly, in the first case of a Chinese court ruling a Fortune 500 firm to be contravening anti-monopoly legislation.

SHANGHAI DAILY

- China's average new-home prices in 100 cities rose 0.87 percent in July from June to 10,347 yuan per square meter, marking the 14th consecutive month of increase, said the China Index Academy on Thursday.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Ferro (FOE) upgraded to Buy from Hold at Deutsche Bank
FleetCor (FLT) upgraded to Overweight from Equal Weight at Barclays
Groupon (GRPN) upgraded to Equal Weight from Underweight at Evercore
ITT Corp. (ITT) upgraded to Market Perform from Underperform at FBR Capital
LinkedIn (LNKD) upgraded to Buy from Hold at Cantor
Mohawk (MHK) upgraded to Outperform from Market Perform at Raymond James
Mylan (MYL) upgraded to Overweight from Equal Weight at Morgan Stanley
Pacific Biosciences (PACB) upgraded to Neutral from Underweight at Piper Jaffray
ResMed (RMD) upgraded to Buy from Hold at Deutsche Bank
Time Warner Cable (TWC) upgraded to Outperform from Market Perform at Raymond James

Downgrades

ADP (ADP) downgraded to Neutral from Positive at Susquehanna
Applied Industrial (AIT) downgraded to Hold from Buy at Wunderlich
BRE Properties (BRE) downgraded to Neutral from Buy at UBS
Broadcom (BRCM) downgraded to Neutral from Buy at UBS
Cbeyond (CBEY) downgraded to Market Perform from Outperform at FBR Capital
DirecTV (DTV) downgraded to Neutral from Buy at Guggenheim
Edison International (EIX) downgraded to Neutral from Outperform at Credit Suisse
Flow International (FLOW) downgraded to Neutral from Buy at Roth Capital
Fly Leasing (FLY) downgraded to Market Perform from Outperform at Wells Fargo
GameStop (GME) downgraded to Neutral from Outperform at Credit Suisse
Guidance Software (GUID) downgraded to Sell from Hold at Benchmark Co.
Halozyme (HALO) downgraded to Equal Weight from Overweight at Barclays
Ligand (LGND) downgraded to Sell from Hold at Cantor
Linear Technology (LLTC) downgraded to Neutral from Buy at UBS
MRC Global (MRC) downgraded to Market Perform from Outperform at Raymond James
Marathon Petroleum (MPC) downgraded to Neutral from Outperform at Macquarie
Mosaic (MOS) downgraded to Neutral from Buy at UBS
Onyx Pharmaceuticals (ONXX) downgraded to Hold from Buy at Jefferies
Protective Life (PL) downgraded to Outperform from Strong Buy at Raymond James
Select Income REIT (SIR) downgraded to Sector Perform from Outperform at RBC Capital
Selective Insurance (SIGI) downgraded to Market Perform at Keefe Bruyette
Taminco (TAM) downgraded to Neutral from Buy at UBS
United Stationers (USTR) downgraded to Hold from Buy at Wunderlich
ValueClick (VCLK) downgraded to Hold from Buy at Needham
ValueClick (VCLK) downgraded to Underperform from Market Perform at Raymond James
ViroPharma (VPHM) downgraded to Market Perform from Outperform at Leerink

Initiations

Calpine (CPN) initiated with a Hold at Drexel Hamilton
Dynegy (DYN) initiated with a Buy at Drexel Hamilton
Electronic Arts (EA) initiated with a Buy at Benchmark Co.
NRG Energy (NRG) initiated with a Buy at Drexel Hamilton

HOT STOCKS

AIG (AIG)  declares dividend of 10c per share, to buy back up to $1B shares
Active Network (ACTV) received expressions of interest, exploring alternatives
BAE Systems (BAESY) awarded $534M contract to sustain U.S. ICBMs by U.S. Air Force
Bank of America (BAC) says DoJ intends to file charges related to securitizations
Credit Suisse (CS) divests CFIG to Grosvenor Capital Management
ImmunoGen (IMGN) announces FDA acceptance of IND for novel EGFR-targeting ADC
Lockheed Martin (LMT) awarded $223.31M government contract
Novartis (NVS) says FDA expands Menveo use for infants, toddlers
Pacira Pharmaceuticals (PCRX) Exparel Phase 3 trial did not meet primary endpoint
ResMed (RMD) increases dividend 47% to 25c
Royal Bank of Scotland (RBS) names Ross McEwan as Chief Executive
Tesoro (TSO) raises quarterly dividend by 25% to 25c
Theravance (THRX) announces FDA Advisory Committee to review Anoro Ellipta
Universal American (UAM) declares $1.60 special cash dividend
Weight Watchers (WTW) names James Chambers as President and CEO, cuts outlook

EARNINGS

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

ImmunoGen (IMGN), Alliant Energy (LNT), Consolidated Edison (ED), LRR Energy (LRE), Approach Resources (AREX), Tellabs (TLAB), PerkinElmer (PKI), MasTec (MTZ), ZAGG (ZAGG), Globus Medical (GMED), AVG Technologies (AVG), Cubic (CUB), Synaptics (SYNA), SciQuest (SQI), Move, Inc. (MOVE), MRC Global (MRC), Southwestern Energy (SWN), Addus HomeCare (ADUS), Alaska Communications (ALSK), SS&C Technologies (SSNC), Audience (ADNC), MaxLinear (MXL), ResMed (RMD), Entravision (EVC), Cascade Microtech (CSCD), Active Network (ACTV), Autobytel (ABTL), OpenTable (OPEN), Hercules Technology (HTGC), Vistaprint (VPRT), ServiceSource (SREV), PerkinElmer (PKI), PC Connection (PCCC), Virtusa (VRTU), Quantum (QTM), Kodiak Oil & Gas (KOG), AIG (AIG), CEC Entertainment (CEC), Weight Watchers (WTW), AMN Healthcare (AHS), Guidance Software (GUID), FEI Company (FEIC), YY Inc. (YY), AtriCure (ATRC), Web.com (WWWW), Skullcandy (SKUL), PROS (PRO), HCI Group (HCI), Eastern Insurance (EIHI), Activision Blizzard (ATVI), FleetCor (FLT), Silver Spring Network (SSNI), LeapFrog (LF), Pacific Biosciences (PACB), DXP Enterprises (DXPE), LinkedIn (LNKD), MercadoLibre (MELI), Omnicell (OMCL), Edison International (EIX), Fluidigm (FLDM), FBL Financial (FFG), NIC Inc. (EGOV)

Companies that missed consensus earnings expectations include:

Eaton (ETN), Portland General Electric (POR), Liberty Global (LBTYA), Berry Plastics (BERY), Harris Teeter (HTSI), Universal American (UAM), Arbitron (ARB), North American Energy (NOA), Mercer (MERC), TG Therapeutics (TGTX), Erie Indemnity (ERIE), Inphi (IPHI), TTM Technologies (TTMI), Uroplasty (UPI), Westport Innovations (WPRT), Leap Wireless (LEAP), Rockwell Medical (RMTI), SBA Communications (SBAC), eMagin (EMAN), Endocyte (ECYT), Bill Barrett (BBG)

Companies that matched consensus earnings expectations include:
Sierra Wireless (SWIR), Immersion (IMMR), Kemper (KMPR), ICF International (ICFI), ON Semiconductor (ONNN), Ellie Mae (ELLI), RealPage (RP), Rudolph Technologies (RTEC), Spansion (CODE), Clear Channel Outdoor (CCO), Chef's Warehouse (CHEF), Financial Engines (FNGN), Einstein Noah (BAGL)

NEWSPAPERS/WEBSITES

Michael Dell, Silver Lake close to deal with Dell (DELL) board, WSJ reports
Apple (AAPL) decision in Samsung case delayed until August 9, Bloomberg reports
Hewlett-Packard (HPQ) developing smartphones with Taiwan makers, DigiTimes says
ICU Medical (ICUI) in exclusive talks on sale, Bloomberg says
Panel to develop new gainful employment rule, Politico reports
Sony (SNE) Mobile may be only Japan-based handset vendor left, DigiTimes says
Yahoo (YHOO) CEO Mayer, activist Loeb parted on bad terms, NY Post says

SYNDICATE

Athlon Energy (ATHL) 15.79M share IPO priced at $20.00
Boyd Gaming (BYD) 16.5M share Secondary priced at $12.00
Control4 (CTRL) 4M share IPO priced at $16.00
Generac (GNRC) files to sell 7.03M shares of common stock for holders
Liberty Property (LRY) 21M share Secondary priced at $36.00
Marrone Bio (MBII) 4.75M share IPO priced at $12.00
Organovo (ONVO) files to sell common stock
Pure Cycle (PCYO) files $15M mixed securities shelf, 1.98M shares of stock for holders
Vantiv (VNTV) files to sell 20M shares of common stock for holder
Williams Partners (WPZ) files to sell 21.5M common units

• Washington Post Company Chairman and CEO Donald Graham talks about the sale, what it means for the future of The Post (WaPo)
• Private-equity firms are adding debt to companies they own to fund payouts to themselves at a record pace (WSJ)
• U.S., U.K. Urge Citizens to Leave Yemen (WSJ)
• India Names Rajan Central Bank Governor as Rupee Plunges (BBG)
• Family Offices Chasing Wealthy’s $46 Trillion in Assets (BBG)
• UK 'bad bank' repays $2.9 billion to taxpayers in first half (Reuters)
• Sony rebuffs Daniel Loeb’s push for entertainment spin-off (FT)
• Public Pensions Up 12% Get Most in 2 Years as Stocks Soar (BBG)
• Hidden Billionaire Found With Food Fortune in California (BBG)
• Fonterra under fire over milk scare; more product recalls (Reuters)
• Crédit Agricole Profit Rises After Greek  (WSJ)
• Four jailed for neo-Nazi killing spree that terrified Hungary's Roma (Reuters)
• Australia PM Rudd criticizes Rupert Murdoch role in election race (Reuters)
• Goldman to Axa Ride London’s Crossrail Office Boom (BBG)

Overnight Media Digest

WSJ

* Jeff Bezos, Amazon.com Inc's Chief Executive, is buying the Washington Post for $250 million in an out-of-the-blue deal that captures the newspaper industry's economic decline and the shift of power from old media to Silicon Valley.

* International Business Machines Corp has enlisted Google Inc, chip maker Nvidia Corp and some other high-tech allies for a collective effort to catapult an IBM chip technology out of a shrinking niche. The alliance, which the companies plan to announce on Tuesday, would allow many companies to license IBM microprocessor designs.

* Neiman Marcus Group Inc has hired Credit Suisse Group AG , J.P. Morgan Chase & Co and Bank of America Merrill Lynch as lead underwriters for a planned public stock offering, after the luxury retailer spent the summer exploring a sale to a sovereign wealth fund.

* Sony Corp rejected hedge fund investor Daniel Loeb's proposal to sell part of its entertainment business through a public offering, saying that holding full ownership of its movies and music divisions are fundamental to the company's future.

* Carl Icahn bought four million more shares of Dell Inc last week, according to a securities filing, upping his stake slightly in an ongoing fight against the technology company's buyout. Icahn now holds 8.9 percent of the company and is the largest shareholder after founder and Chief Executive Michael Dell.

* Time Warner Cable Inc proposed an end to the three day old blackout of CBS Corp on the cable operator's TV channel lineup, suggesting that viewers could pay a la carte for the network, in other words, allowing cable subscribers the freedom to pick CBS individually. CBS called the proposal a "sham."

* The South Korean government on Monday expressed concern over the Obama administration's decision to veto an import ban on some Apple Inc products in the United States, saying the decision may negatively affect Samsung Electronics Co's patent rights.

* Private equity firm Hellman & Friedman LLC agreed to acquire insurance brokerage Hub International Ltd for more than $4 billion from a rival buyout firm, in a deal that will help the Chicago broker continue its rapid expansion, including a bigger move into Latin America.

* The Federal Bureau of Investigation has discovered vulnerabilities in the government's system for preventing market-moving economic reports from leaking to traders before public release.

FT

HSBC on Monday said it may have to pay $1.6 billion in damages to the U.S. government over bad mortgages, higher than originally forecast.

A US regulator has accused a trading team at BP of manipulating gas prices in the aftermath of a 2008 hurricane by moving natural gas through a pipeline linking two Texas hubs.

French bank Credit Agricole - accidentally - published better than expected quarterly results on its website on Monday, ahead of its scheduled results announcement on Tuesday.

Private equity group Hellman & Friedman said it would pay $4.4 billion to buy Hub International from Apax Partners in the biggest ever takeover in the insurance broking industry.

Amazon.com founder Jeff Bezos plans to buy the Washington Post for $250 million, ending an era of family control at the newspaper that struggled in an age of online media.

NYT

* The Washington Post, the newspaper whose reporting helped topple a president and inspire a generation of journalists, is being sold for $250 million to Amazon.com Inc founder Jeffrey Bezos, in a deal that has shocked the industry.

* After gun laws were strengthened in several states in the wake of the Newtown, Connecticut, school shooting, some manufacturers are relocating to more gun-friendly states. Governors and politicians from states eager to embrace the industry have descended on places where they are not so popular - like Connecticut, Maryland, New York and Colorado - offering tax breaks and outright cash grants to persuade gun manufacturers to relocate.

* Government authorities are homing in on a lucrative loophole that allows online lenders to offer short-term loans at interest rates that often exceed 500 percent annually, the latest front in a crackdown on the payday lending industry.

* Sony Corp said late on Monday that it planned to keep all of its vast entertainment arm, rejecting a proposal to spin off the unit by one of its biggest investors, activist hedge fund manager Daniel Loeb. The decision, announced in a publicly disclosed letter to Loeb, raises questions about whether he will now stage a public fight with Sony.

* The reinsurance arm of Third Point, the hedge fund run by Daniel Loeb, disclosed on Monday that it is seeking to raise up to $370.6 million from its forthcoming initial public offering. Third Point Reinsurance said that it planned to sell 22.2 million shares at $12.50 to $14.50 a share.

* New Zealand dairy producer Fonterra apologized on Monday for the contamination of an infant milk formula ingredient with a potentially toxic strain of bacteria. The contamination could hurt sales of dairy products, the leading export of New Zealand, to its most crucial market, China.

* European Aeronautic Defense and Space Co (EADS), the parent company of Airbus, confirmed on Monday that it had received a letter from hedge fund TCI, urging it to sell its 46 percent stake in Dassault Aviation, the French maker of the Rafale fighter and the popular Falcon business jet

Canada

THE GLOBE AND MAIL

* The federal Conservative government consulted with both environmental organizations and industry associations before making controversial changes to the Fisheries Act last year, but listened primarily to industry. Documents released recently to The Globe and Mail under federal access to information laws suggest that the wording of a significant change was offered by industry associations.

Reports in the business section:

* Barrick Gold Corp is facing yet another class action lawsuit from a group of investors in the Canadian mining giant as it struggles to adjust to faltering metal prices. The suit alleges Barrick violated federal securities laws by making false and misleading statements, and by concealing information related to the cost and development schedule for its Pascua-Lama project, one of Barrick's South American mines.

* Bombardier Inc says it can still maintain its position by year end as the world's largest business aircraft manufacturer despite falling behind U.S. rival Gulfstream Aerospace Corp in terms of the value of planes shipped in the second quarter. U.S.-based Gulfstream shipped 36 aircraft worth $1.83 billion in the quarter, compared with 45 planes valued at $1.59 billion for Bombardier.

NATIONAL POST

* Days after a deadly Toronto shooting sparked debate, Alberta's police watchdog is looking into three incidents that saw Royal Canadian Mounted Police officers use their firearms or a Taser, resulting in two dead and two wounded.

* An intercepted secret message between al-Qaeda chief Ayman al-Zawahri and his deputy in Yemen about plans for a major terror attack was the trigger that set off the current shutdown of many U.S. embassies, two officials told The Associated Press on Monday.

* Canada's high commission in Dhaka, Bangladesh, reopened its doors on Monday after a "security precaution" resulted in one-day closure of the embassy on Sunday, according to the Foreign Affairs Department.

FINANCIAL POST

* Even if Canadian home sales continues to slide, it could take some time before home ownership rates are actually impacted. However, the risk to the Canadian economy is the buyers entering the market today are on the fringe, much the way they were in the United States before the housing market crashed there.

* At least three governments and two energy industry groups are leading what they hope will be a "pan-Canadian" approach to find ways to improve the country's pipelines. Alberta, British Columbia and Natural Resources Canada, as well as the Canadian Association of Petroleum Producers and the pipeline association are setting up the collaborative, which is expected to be operational by late fall.

* TransCanada Corp's planned 2,700 mile pipeline, which will bring crude from Alberta to refineries and ports on the East Coast, has the potential to upturn the dynamics of the North Atlantic oil trade squeezing out some imported crude to North America and revitalizing once ailing refineries.

* From recent initiatives targeting offshore tax havens and multi-millionaire tax cheats, the Canada Revenue Agency (CRA) has now been cracking its disciplinary whip on middle-income operators, including waitresses, used car salesmen, and even maple syrup producers. Dozens of cross country pilot projects were ordered by the CRA to help develop techniques for eradicating the underground economy, and indicates a change in agency priority to spotlight middle-income tax avoiders, according to a Canadian tax expert

China

CHINA SECURITIES JOURNAL

- China should persevere with policies to regulate and control the property market amid the complex domestic economic environment, said Xu Shaoshi, director of the National Development and Reform Commission (NDRC) at a conference held on Monday.

SHANGHAI SECURITIES JOURNAL

The ministry of environment will toughen environmental protection standards for six base metals industries as part of the government's anti-pollution efforts, the paper said, citing unidentified sources. The ministry will set emission standards for industrial pollutants and the plan will help accelerate the consolidation of the industry.

CHINA DAILY

- China is drafting detailed measures to promote growth in cross border e-commerce that will likely take effect later this year, as outbound shipments through the internet are increasingly important for Chinese exporters and manufacturers, said a source from the ministry of commerce.

SHANGHAI DAILY

- China will continue to introduce policies and take measures to encourage private investment to spur economic development and create jobs, said the National Development and Reform Commission. Private investment accounted for 64 percent of the total fixed-asset investment in China, compared to 61.4 percent by the end of last year, the NDRC said.

- There has been a sharp decrease in Chinese household confidence in the economy, amid slower growth in business activity and income, according to a survey released by the China Wealth Index on Monday.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Audience (ADNC) upgraded to Buy from Hold at Benchmark Co.
Fiserv (FISV) pgraded to Overweight from Equal Weight at First Analysis
Meadowbrook (MIG) upgraded to Sector Perform from Underperform at RBC Capital
Old Dominion (ODFL) upgraded to Outperform from Sector Perform at RBC Capital
FreightCar America (RAIL) upgraded to Neutral from Underperform at Longbow
Responsys (MKTG) upgraded to Outperform from Neutral at Credit Suisse
SurModics (SRDX) upgraded to Outperform at Barrington citing market share
Vocera (VCRA) upgraded to Outperform from Market Perform at Wells Fargo
Volcano (VOLC) upgraded to Buy from Hold at Canaccord

Downgrades

American Eagle (AEO) downgraded to Hold from Buy at Brean Capital
American Eagle (AEO) downgraded to Neutral from Buy at Janney Capital
Cardtronics (CATM) downgraded to Neutral from Buy at Compass Point
Chico's FAS (CHS) downgraded to Neutral from Buy at Janney Capital
DSW (DSW) downgraded to Hold from Buy at BB&T
Deere (DE) downgraded to Underperform from Market Perform at William Blair
First Financial (FFIN) downgraded to Underperform from Neutral at Sterne Agee
Fresenius Medical (FMS) downgraded to Hold from Buy at Societe Generale
GlaxoSmithKline (GSK) downgraded to Neutral from Buy at Citigroup
IBM (IBM) downgraded to Underperform from Neutral at Credit Suisse
Kosmos (KOS) downgraded to Neutral from Buy at Citigroup
McDermott (MDR) downgraded to Hold from Buy at BB&T
NIC Inc. (EGOV) downgraded to Market Perform from Outperform at Barrington
Strategic Hotels (BEE) downgraded to Neutral from Overweight at JPMorgan
Titan Machinery (TITN) downgraded to Underperform from Market Perform at William Blair
Unilever (UN) downgraded to Neutral from Overweight at JPMorgan
Web.com (WWWW) downgraded to Neutral from Buy at Roth Capital

Initiations

Acuity Brands (AYI) initiated with a Neutral at Goldman
CDW Corporation (CDW) initiated with a Buy at Deutsche Bank
CDW Corporation (CDW) initiated with a Buy at Goldman
CDW Corporation (CDW) initiated with a Neutral at RW Baird
CDW Corporation (CDW) initiated with an Overweight at JPMorgan
Fifth Street Senior (FSFR) initiated with a Buy at Deutsche Bank
HD Supply (HDS) initiated with a Buy at UBS
HD Supply (HDS) initiated with a Neutral at Goldman
HD Supply (HDS) initiated with an Outperform at Credit Suisse
HD Supply (HDS) initiated with an Outperform at RW Baird
HD Supply (HDS) initiated with an Outperform at Wells Fargo
TTM Technologies (TTMI) initiated with a Buy at Canaccord

HOT STOCKS

Carl Icahn bought 4M shares of Dell (DELL) on August 1
Chesapeake Lodging (CHSP) raises quarterly dividend by 8.3% to 26c per share
Chevron (CVX) to pay $2M for Richmond refinery fire
Codexis (CDXS) receives notice alleging breach of Dyadic license agreement
Cutera (CUTR) authorizes $10M repurchase plan in addition to 10b5-1 plan
Emerson (EMR) to sell 51% stake in embedded computing and power business
Guggenheim reports 15% stake in Diamond Resorts (DRII), to nominate directors
JA Solar (JASO) to supply solar modules to Phoenix Solar for Simon Solar Farm
Jeff Bezos to purchase Washington Post (WPO) newspaper publishing business for $250M
Kindred Healthcare (KND) initiates quarterly cash dividend of 12c per share
MFP Investors reports 8.1% stake in ALCO Stores (ALCS), says $14 offer 'inadequate'
Monarch reports 18.63% stake in Star Bulk Carriers (SBLK), seeks board seat
National Healthcare (NHC) authorizes $25M share repurchase program
Quidel (QDEL) gets FDA clearance for Sofia hCG fluorescent immunoassay
Regeneron (REGN), Bayer report positive results from two Phase 3 trials of Eylea
SAC Capital reports 5.1% passive stake in Children's Place (PLCE)
Siemens (SI) announces $966.8M order from Saudi Aramco
Sony (SNE) says spinning off entertainment assets not consistent with strategy
Spectra Energy Partners (SEP) to acquire Spectra (SE) assets for partner units, $2.2B cash
Spectrum Brands (SPB) board approves new $200M common stock repurchase program
The Medicines Co. (MDCO) reports positive results from Phase III trial

EARNINGS

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

Pacira Pharmaceuticals (PCRX), Dawson Geophysical (DWSN), Cognizant (CTSH), Global Geophysical (GGS), Bristow Group (BRS), Endurance Specialty (ENH), Legacy Reserves (LGCY), Hillenbrand (HI), DealerTrack (TRAK), GT Advanced (GTAT), PAA Natural Gas Storage (PNG), Alleghany (Y), Fidelity National (FNF), Vocera (VCRA), QCR Holdings (QCRH), Ducommun (DCO), Stone Energy (SGY), Entercom Comm (ETM), PDI, Inc. (PDII), American Science & Engineering (ASEI), Hologic (HOLX), BroadSoft (BSFT), Black Diamond (BDE), Sykes Enterprises (SYKE), Emergent BioSolutions (EBS), RigNet (RNET), Unum Group (UNM), Qualys (QLYS)

Companies that missed consensus earnings expectations include:

Spectra Energy (SE), Cinemark (CNK), Spectrum Brands (SPB), EchoStar (SATS), PetroQuest Energy (PQ), Commtouch (CTCH), Zebra Technologies (ZBRA), Allot Communications (ALLT), Endeavour (END), Skilled Healthcare (SKH), Otter Tail (OTTR), Alon USA Partners (ALDW), Kindred Healthcare (KND), Preferred Apartment (APTS), Ellington Financial (EFC), Atlas Pipeline Partners (APL), Midstates Petroleum (MPO), Anaren (ANEN), McDermott (MDR), Morgans Hotel (MHGC), EXCO Resources (XCO), Capital Senior Living (CSU), Rosetta Resources (ROSE), Black Hill (BKH), FairPoint (FRP), ProAssurance (PRA), BMC Software (BMC), Synageva (GEVA), Plains All American (PAA), American Vanguard (AVD), Hill International (HIL), Jamba (JMBA), Cutera (CUTR), ArthroCare (ARTC), SIGA Technologies (SIGA), Wright Medical (WMGI), Nautilus (NLS)

Companies that matched consensus earnings expectations include:

Vitamin Shoppe (VSI), RDA Microelectronics (RDA), Tesoro Logistics (TLLP)

NEWSPAPERS/WEBSITES

Alliant Techsystems (ATK) in talks on Bushnell buy, Reuters says
GM (GM) slashes Chevy Volt price by $5,000 to boost sales, Bloomberg says
IBM (IBM) furloughs hardware staff to cut costs, Bloomberg says
Morgan Stanley (MS) exploring options for commodities unit, Reuters reports
NAND flash prices to return to growth in September, October, DigiTimes says

SYNDICATE

Advent Software (ADVS) files to sell 7.26M shares for SPO Advisory
Allison Transmission (ALSN) files to sell 16.6M shares of common stock for holders
Capital Product (CPLP) files to sell 11.9M common units representing limited partners
Einstein Noah (BAGL) files to sell 1.5M shares of common stock for holders
Northstar Realty (NRF) files to sell 35M shares of common stock
PDC Energy (PDCE) raises stock offering to 4.5M shares from 3.75M shares
TRW Automotive (TRW) files to sell 10.9M shares of common stock for holders

• Fukushima: "300 metric tons of contaminated water were likely leaking into the ocean daily" (WSJ)
• Unexpected strength in China trade data eases some gloom (Reuters) - actually, perfectly expected data fakery
• Pimco, BlackRock Seek to Bar California Mortgage Seizures (BBG)
• How will Amazon's Bezos change The Washington Post? (Reuters)
• Montreal Maine Railway Files for Bankruptcy After Crash (BBG)
• Fed Belongs to Everybody as Public Says It’s Our Money in Crisis (BBG)
• Local Russian TV channel broadcasts rare critical segment about Putin (Reuters)
• Loeb’s Reinsurer With No U.S. Staff Gains From Obama’s Jobs Act (BBG)
• As Berlusconi star fades, daughter Marina tipped as new leader (Reuters)
• Detroit Rattles Muni Market (WSJ)
• Assad shown unharmed after Syria rebels report attack (Reuters)
• Probe Turns Up Heat on Banks (WSJ)

Overnight Media Digest

WSJ

* The Justice Department is targeting banks that service a broad range of what it considers questionable financial ventures, including online payday lenders. The government has issued subpoenas to banks and other companies that handle payments for an array of financial offerings, ramping up an investigation that has been under way for several months.

* Google Inc's Android software continues to steamroll the competition in smartphones, posing bigger problems for companies like Apple Inc and BlackBerry Ltd . According to research firm IDC, Apple's share of the global market slid to 13.2 percent in the second quarter from 16.6 percent in the year earlier period.

* Groupon Inc on Wednesday named co-founder and interim co-chief executive Eric Lefkofsky as its permanent CEO. It also said second-quarter revenue rose 7 percent on the back of surging North American sales.

* Hotel chain Hilton Worldwide Inc is preparing for a return to the public markets, choosing four banks to manage a share sale as the hotel group's private equity owner looks to capitalize on a rebounding real estate market and strong investor demand for initial public offerings.

* A year and a half after being spun off by Expedia Inc , TripAdvisor Inc redesigned its website to show shoppers more hotel options right there among its traveler reviews, rather than referring them to sites like Expedia's via pop-up windows. Expedia relies on bookings. TripAdvisor depends on ads. But both are vying to be travelers' first stop online.

* The Ochs-Sulzberger family that owns the New York Times Co declared the newspaper was "not for sale," making clear it wouldn't follow the decision of the Washington Post's family owners to exit the newspaper industry.

* Energy companies have been selling billions of dollars of aging oil-and-gas fields to partnerships that are flush with cash from individual investors. Critics are raising questions about the soundness of these partnerships, saying that they use accounting maneuvers to understate their costs, and warn that this source of easy money for energy companies could soon dry up.

* A federal appeals court in Washington handed Apple Inc another significant patent victory, reviving the iPhone maker's claims against Google Inc's Motorola Mobility unit over two significant patents for smartphone touchscreens

FT

The U.S. Department of Justice is scrutinising JPMorgan Chase & Co's sale of mortgage-backed securities in a new side to the government's probe of the bank that lost $6 billion in a trading debacle last year.

U.S. agribusiness giant Cargill is expanding its trading operation to move more oil, coal, natural gas and power, despite the banking industry's retreat from physical energy markets.

Mondelez International, the packaged food company spun out of Kraft Foods, gave the go-ahead to a $4.8 billion boost to its share buyback programme.

Blackstone-controlled hotel conglomerate Hilton Worldwide is considering a U.S. float that could mean a listing as soon as early 2014, people familiar with the matter said.

Insurer Old Mutual's Chief Executive Julian Roberts warned European rivals that they would find it difficult follow its quick move into Sub-Saharan Africa.

Groupon on Wednesday appointed Eric Lefkofsky its new chief executive, five months after the company ousted its founder, Andrew Mason and named Lefkofsky its interim CEO.

NYT

* JPMorgan Chase & Co disclosed on Wednesday that it faced a criminal and civil investigation in Philadelphia and California, into whether it sold shoddy mortgage securities to investors in the run up to the financial crisis, the latest legal threat to the nation's biggest bank.

* As private equity firms rush to cash in on their investments, the Blackstone Group LP is moving to sell Hilton Worldwide Inc, one of the biggest companies to go private in recent years. An offering for Hilton would probably be in the first half of next year, people briefed on the matter said.

* With his purchase of four million shares of Dell Inc and a lawsuit to halt changes on a shareholder vote on the company's proposed takeover, Carl Icahn is doing his best to bolster his assault on Dell, as the odds mount against him.

* AOL Inc agreed on Wednesday to buy Adap.tv, a video advertising platform, for about $405 million in cash and stock, in its biggest acquisition since becoming an independent company.

* The Zhongshe mine and two others, in Shanxi Province in northern China, are at the center of unusually public accusations of mismanagement and corruption afflicting one of the nation's flagship state conglomerates, China Resources.

* A heated Chinese business and political dispute that has stopped about $200 million in box office payments to Hollywood studios appears near a resolution. The dispute, which has persisted for months, centers on the imposition of a 2 percent value added tax on movie ticket sales in China.

Canada

THE GLOBE AND MAIL

* Locals in Lac-Megantic, Quebec, expressed anger as they learned that the Montreal, Maine & Atlantic Railway (MM&A), the rail company at the center of their ordeal, filed for creditor protection. The request came one month and one day after the devastating disaster caused by a runaway MM&A oil train.

* Real Women of Canada, a right wing women's group, is attacking Foreign Affairs Minister John Baird for defending the civil rights of gays abroad, suggesting the Conservative Party member of parliament is out of step with "conservative values" and the grassroots within his own party.

Reports in the business section:

* Ken Lewenza, president of the Canadian Auto Workers union, and Dave Coles, president of the Communications, Energy and Paperworkers Union of Canada, will step down when the planned merger of the two unions takes effect in September.

* The announcement last week that the Russian potash producer OAO Uralkali is striking out on its own and breaking up one of the world's two potash cartels sent shock waves through the fertilizer industry and prompted bearish predictions of a 20 to 25 percent fall in potash prices. However, Potash Corp of Saskatchewan Inc Chief Executive Bill Doyle told frazzled investors on Wednesday the industry would persevere and there's no reason for panic.

* BlackBerry Ltd, which once controlled the smartphone market, now finds itself knocked back to fourth place. The latest report on worldwide smartphone market share shows the Waterloo-based company slipping behind the Windows Phone brand, Microsoft Corp's line of mobile devices.

NATIONAL POST

* The Stephen Harper government says it has further tightened the rules governing its controversial temporary foreign worker program, confirming it will charge employers $275 for each application they make.

* Canadian Auto Workers (CAW) President Ken Lewenza will reportedly announce that he's stepping down in September. Media reports late Wednesday also said Dave Coles, the president of the Communications, Energy and Paperworkers Union of Canada, will also resign. Reports say Lewenza and Coles are expected to endorse senior CAW official Jerry Dias as president of the new combined union, called Unifor.

FINANCIAL POST

* Montreal, Maine & Atlantic Railway has filed for bankruptcy protection in both Canada and the United States, setting the stage for a massive legal battle as lawyers for Quebec victims of one of North America's deadliest rail crashes target the railway's parent and the oil companies involved.

* Air Canada's shares soared nearly 24 percent on Wednesday after the airline surprised analysts by recording its best second-quarter revenue in its history and dramatically improved its operating income by successfully trimming costs.

* Three more senior BlackBerry Ltd executives "are leaving, or have already left" the struggling smartphone manufacturer this month, according to a spokesperson. These come as the latest in a string of departures, resignations and layoffs that have struck the Waterloo, Ontario-based company with increasing regularity.

China

CHINA SECURITIES JOURNAL

- Shanghai's free trade zone is currently still in its developmental stage, but formal examination and approval should now not take long, Shen Danyang, spokesman for the Ministry of Commerce, said at a press conference on Wednesday.

SHANGHAI SECURITIES NEWS

- A new stock index futures contract tracking a group of mainland companies listed in Shanghai, Shenzhen, and Hong Kong firms will start trading on the Hong Kong Stock Exchange on Aug. 12, Hong Kong Exchanges and Clearing revealed on Wednesday.

PEOPLE'S DAILY

- The Chinese government must allow market forces to play a part in resolving overcapacity in the market. Although it will be painful, the results will make it worth it, said an editorial.

NATIONAL BUSINESS DAILY

- Boeing Co is in the midst of deciding where in China to build its aircraft assembly line and is inclined towards Shanghai, Tianjin, Zhengzhou and Zhoushan among others, according to industry experts.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Groupon (GRPN) upgraded to Neutral from Sell at UBS
Lowe's (LOW) upgraded to Overweight from Neutral at JPMorgan
Microsoft (MSFT) upgraded to Overweight from Equal Weight at Evercore
Panera Bread (PNRA) upgraded to Buy from Hold at Wunderlich
Quad/Graphics (QUAD) upgraded to Sector Perform from Underperform at RBC Capital
RealD (RLD) upgraded to Buy from Neutral at B. Riley
SunEdison (SUNE) upgraded to Buy from Neutral at BofA/Merrill
Total (TOT) upgraded to Overweight from Equal Weight at Morgan Stanley
Whiting USA Trust (WHZ) upgraded to Neutral from Underperform at RW Baird

Downgrades

Ametek (AME) downgraded to Neutral from Outperform at RW Baird
AngloGold (AU) downgraded to Underweight from Neutral at HSBC
Calumet Specialty Products (CLMT) downgraded to Neutral from Outperform at Credit Suisse
Carlyle Group (CG) downgraded to Neutral from Buy at Citigroup
CenterPoint Energy (CNP) downgraded to Neutral from Buy at UBS
Crocs (CROX) downgraded to Underperform from Neutral at Sterne Agee
EVERTEC (EVTC) downgraded to Equal Weight from Overweight at Morgan Stanley
Fusion-io (FIO) downgraded to Hold from Buy at Benchmark Co.
Harmony Gold (HMY) downgraded to Underweight from Neutral at HSBC
Horizon Technology (HRZN) downgraded to Underperform at Raymond James
Iron Mountain (IRM) downgraded to Equal Weight from Overweight at Barclays
Nanosphere (NSPH) downgraded to Neutral from Buy at Roth Capital
Oasis Petroleum (OAS) downgraded to Hold from Buy at Canaccord
Piedmont Office Realty (PDM) downgraded to Neutral from Outperform at RW Baird
Ralph Lauren (RL) downgraded to Buy from Strong Buy at ISI Group
Royal Dutch Shell (RDS.A) downgraded to Equal Weight from Overweight at Morgan Stanley
Stanley Black & Decker (SWK) downgraded to Hold from Buy at KeyBanc
Target (TGT) downgraded to Neutral from Overweight at JPMorgan
Tesla (TSLA) downgraded to Equal Weight from Overweight at Barclays

Initiations

Coty (COTY) initiated with a Neutral at Citigroup
Endo Health (ENDP) initiated with a Buy at Citigroup
MAKO Surgical (MAKO) initiated with a Hold at Needham
Netflix (NFLX) initiated with a Neutral at RW Baird
Netflix (NFLX) initiated with a Neutral at RW Baird
Nike (NKE) initiated with an Outperform at Wells Fargo
NuVasive (NUVA) initiated with a Buy at Needham
Stryker (SYK) initiated with a Hold at Needham
Under Armour (UA) initiated with a Market Perform at Wells Fargo
Valeant (VRX) coverage resumed with an Overweight at JPMorgan
Wright Medical (WMGI) initiated with a Buy at Needham
Zimmer (ZMH) initiated with a Buy at Needham

HOT STOCKS

Fairfax increased offer for American Safety Insurance (ASI) to $30.25 p/s
MetLife (MET) disclosed DOJ subpoena related to foreclosure-related expenses
JPMorgan (JPM) said responding to parallel investigations related to MBS offerings
Hilton said to plan $13B debt restructuring before IPO (BX), Bloomberg reports
Nestle (NSRGY) sees full year organic growth of about 5%
Jack in the Box (JACK) raised FY13 ex-items EPS to $1.72-$1.78, consensus $1.65
Tesla (TSLA) expects to be non-GAAP profitable in every quarter this year
Mondelez (MSLZ) said accelerating 2014 emerging market investments into 2013
Increased share repurchase authorization to $6B

EARNINGS

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

Visteon (VC), AES Corp. (AES), Continental Resources (CLR), Neenah Paper (NP), Babcock & Wilcox (BWC), DryShips (DRYS), Rosetta Stone (RST), Sunoco Logistics (SXL), Saint Joe Co. (JOE), PharmAthene (PIP), Prudential (PRU), Tesla (TSLA), Green Mountain (GMCR)

Companies that missed consensus earnings expectations include:

Walker & Dunlop (WD), Fairway Group (FWM), Energy Transfer Equity (ETE), Brookdale Senior Living (BKD), Delek US (DK), Vale (VALE), Natural Resource Partners (NRP), Kronos Worldwide (KRO), Concho Resources (CXO), Flotek (FTK), Cenveo (CVO), American Water (AWK)

Companies that matched consensus earnings expectations include:

BioScrip (BIOS), TransAtlantic Petroleum (TAT), Transocean (RIG), MELA Sciences (MELA), Fusion-io (FIO), Frontier Communications (FTR)

NEWSPAPERS/WEBSITES

• Google’s (GOOG) Android software continues to steamroll the competition in smartphones, posing bigger problems for companies like Apple (AAPL) and BlackBerry (BBRY), the Wall Street Journal reports
• Energy companies (LINE, BRY) eager for cash to fuel their increasingly costly operations have been selling billions of dollars of aging oil-and-gas fields to partnerships whose growth has been fueled by individual investors. But critics are raising questions about the soundness of these partnerships, the Wall Street Journal reports
• Canada's wireless industry (RCI, BCE, TU) is bracing for its biggest shakeup in decades as the government appears impervious to pleas that it block Verizon Communications (VZ) from the lucrative market, Reuters reports
• Some seven bidders are lining up for Telediffusion de France's  domestic business and lenders are preparing debt packages of over $2.7B for a deal worth about EUR 4B, sources say. Interested parties include American Tower (AMT) and Crown Castle (CCI), and Macquarie (MIC), sources add, Reuters reports
• Apple (AAPL) is trying to force Samsung Electronics Co.’s (SSNLF) mobile devices off U.S. store shelves a week after dodging an iPhone 4 ban by a rare White House veto. The company will ask a U.S. appeals court to block sales of Samsung models a California jury found violated patents for the iPhone’s look and features, Bloomberg reports

NTT DoCoMo (DCM) will order more Sony (SNE) smartphones as Japan’s largest wireless carrier keeps Apple’s (AAPL) iPhone off its shelves because the iTunes Store competes with its own e-commerce business, Bloomberg reports

SYNDICATE

Advent Software (ADVS) 7.261M share Secondary priced at $27.00
DCP Midstream (DPM) 9M share Secondary priced at $50.04
DCT Industrial (DCT) files to sell 20M shares of common stock
Diamondback Energy (FANG) files to sell 4M shares of common stock
Fox Factory (FOXF) 8.571M share IPO priced at $15.00
Graphic Packaging (GPK) files to sell 15M shares of common stock for holders
Halcon Resources (HK) files to sell 38M shares of common stock
Highwoods Properties (HIW) files to sell 3.75M shares of common stock
Intrexon (XON) 9.9M share IPO priced at $16.00
KAR Auction (KAR) 15M share Secondary priced at $25.00
Norwegian Cruise Line (NCLH) files to sell 20M ordinary shares for holders
Regional Management (RM) files to sell 7.3M shares of common stock for holders
Wesco Aircraft (WAIR) files to sell 6M shares of common stock for holders
XPO Logistics (XPO) 9.69M share Secondary priced at $22.75

• JPMorgan Nears Settlement With SEC on London Whale Loss (BBG)
• Without even a wristslap: Iksil to face no U.S. charges in 'Whale' probe (Reuters)
• China’s Credit Expansion Slows as Li Curbs Shadow Banking (BBG)
• China slowdown shows signs of abating (FT), even as...
• Australia central bank Lowers Growth Outlook as Economy Transitions From Mining (BBG)
• SAC Business Plan Goes to Judge, Plan Would Allow Firm to Maintain Business Operations but Restrict Its Ability to Move Assets (WSJ)
• Another buyer of Herbalife? - Norway’s oil fund plans to turn active (FT)
• Mark Carney plays down scepticism over interest rate policy (FT)
• Orders Evaporate for Celebrity Perfumes (WSJ)
• India Adds to Cash-Supply Curbs as Rupee Volatility Climbs (BBG)
• Third Vote Said Held by BOE in Carney Guidance Debate (BBG)
• Brazil calls for IMF eurozone rescue programmes revision (FT)
• Italy Aims for More Budget Austerity (WSJ)
• Bernanke Successor Seen as No Obstacle to Tarullo Banking Rules (BBG)

Overnight Media Digest

WSJ

* The terror plot that has temporarily shut down 19 U.S. diplomatic posts wasn't ordered by al Qaeda's leader Ayman al Zawahiri, but proposed by al Qaeda's Yemeni branch and approved by the global Qaeda chief, a senior U.S. official said Thursday in a more specific description of the plot's origin.

* J.C. Penney Co Inc is looking for a new chief executive to unseat interim CEO Myron Ullman, under pressure from investor William Ackman, who said a new chief needs to be found within 30 to 45 days. The department store chain's board blasted him for being "disruptive" and "counterproductive".

* Cities in the West and the Sunbelt, among the hardest hit during the real estate downturn, continue to lead the nation's housing recovery, posting double-digit gains in home prices that have outpaced even the most optimistic projections from a year ago. Among the 10 cities with the fastest year-over-year price growth, nine were in California, Florida or Nevada, states worst hit by the real estate bust.

* SAC Capital Advisors LP and prosecutors asked a federal judge to approve an agreement that would allow the hedge fund giant to maintain business operations but restrict its ability to move assets elsewhere while facing criminal insider trading charges, according to filings related to the case.

* China plans to move tens of millions to cities in a drive to boost domestic incomes and consumption, but some newly built cities such as Tieling New City are virtually ghost towns, luring few employers or residents.

* T-Mobile US Inc posted a quarterly loss but added 688,000 of the most-valuable wireless subscribers in the second quarter, a sign that Verizon Wireless and AT&T Inc may face tougher competition in the market they have long dominated.

* Shares of perfume makers tumbled Thursday, after Elizabeth Arden Inc said orders from one of its biggest retailer-customers, had been cut sharply in recent months. Executives at the company didn't name the retailer, but Wal-Mart Stores Inc is its biggest customer, according to Elizabeth Arden securities filings, accounting for about a fifth of its sales in North America.

* Container-shipping companies battled weak freight demand in the second quarter, as they continued to be burdened by capacity added in the teeth of a global economic slowdown. Shipping-rate increases beginning in July could provide a second-half boost, analysts said, though overcapacity is expected to persist for some time.

* The long-running patent war between smartphone giants Apple Inc and Samsung Electronics Co will be back in the spotlight on Friday with two legal developments that could help tip the balance. The companies will argue before a federal appeals court in Washington over whether a lower court erred last year when it allowed Samsung to continue selling more than two dozen products after a jury found they infringed Apple patents.

FT

Norway's $760 billion sovereign wealth fund, the world's largest, has appointed a corporate governance advisory board in an attempt to be a more active investor.

Bank of England governor Mark Carney played down market scepticism that the Monetary Policy Committee will fail to keep interest rates on hold for another three years.

Energy-focused private equity firm Riverstone Holdings will float a new energy vehicle - Riverstone Energy - on the London Stock Exchange

China International Capital Corporation, one of China's top investment banks, is planning to go public and has commissioned an internal study to look into the possibility of listing, according to people familiar with the matter.

Global miner Rio Tinto scrapped plans to sell its loss-making Pacific Aluminium business in a sign of tough market conditions facing the miner, which is trying to offload underperforming assets during an industry downturn.

Russia's second-biggest mobile phone operator Megafon is buying next-generation service provider Scartel for $1.2 billion as it looks to extend its lead in the race to provide high-speed internet.

Britain's Serious Fraud Office admitted to an "accidental data loss" of 32,000 pages of data and 81 audio tapes linked to a bribery investigation involving Britain's biggest defence contractor, BAE Systems.

NYT

* Two weeks after Detroit declared bankruptcy, cities, counties and other local governments in Michigan are getting a cold shoulder in the municipal bond market. Borrowing costs are up around the state, in some cases drastically. On Thursday, Saginaw County became the latest casualty when it said it was delaying a $60 million bond sale planned for Friday.

* JPMorgan Chase & Co is close to a deal with regulators over whether it gave lowball estimates for trading losses despite evidence within the bank that the bet was spiraling out of control. The losses, which have now swelled to more than $6 billion, stemmed from outsize derivatives wagers made by traders at JPMorgan's chief investment office in London.

* BHP Billiton PLC, the world's largest mining company in a sector that is deeply out of favor with investors, is aggressively curtailing its spending in hopes of winning them over. Investors' central complaint is that big companies, during a period of high metals prices and strong profit from 2009 to 2011, spent too much money building mines instead of returning money to shareholders.

* Hervé Falciani is a professed whistle-blower, the Edward Snowden of banking, who has been hunted by Swiss investigators, jailed by Spaniards and claims to have been kidnapped by Israeli Mossad agents eager for a glimpse of the client data he stole while working for a major financial institution in Geneva. Once dismissed by many European authorities, he and other whistle-blowers are now being courted as the region's governments struggle to fill their coffers and to stem a populist uprising against tax evasion and corruption.

* On Friday the federal International Trade Commission is expected to say whether it will uphold a preliminary finding that Samsung Electronics Co Ltd mobile products violated a handful of Apple Inc's patents. A decision against Samsung by the commission could result in an import ban on some of the company's mobile devices. A decision for Apple would be its second major legal win against Samsung in less than a week.

* Carl Icahn is suing Dell's board over its latest decision to accept a higher buyout offer from Michael Dell in exchange for modifying the rules governing the vote for the deal. On Monday, a hearing will take place in the Delaware Court of Chancery on whether to expedite Icahn's suit.

* Britain's Serious Fraud Office faced renewed embarrassment on Thursday after it admitted it had lost thousands of documents linked to an investigation into the British aerospace giant BAE Systems PLC. The agency has been trying to rejuvenate its reputation under its new leader, David Green.

Canada

THE GLOBE AND MAIL

* The Quebec government says it can jump to the front of the line of the Montreal, Maine & Atlantic railway creditors seeking millions, to compensate the Lac-Megantic derailment victims and cover its cleanup bill. Quebec is counting on the environmental provisions of the federal Companies' Creditors Arrangement Act to get repaid by the Canadian subsidiary of MM&A, which listed C$48 million ($46.31 million) in liabilities but only C$18 million in assets in its bankruptcy filing. But legal experts aren't so sure if that recourse will be as far-reaching as the government suggested.

* A secluded beach on the northern tip of Vancouver Island has become the epicenter of a feud between a hippie-style counterculture movement and local residents concerned about protecting the environment. A Facebook event page, now deleted, showed more than 1,800 people were planning to attend the month-long "World Rainbow Gathering", where attendees would live off the land and pray for world peace.

Reports in the business section:

* Telus Corp Chief Executive Darren Entwistle launched his harshest attack yet on Ottawa's telecom policy, arguing that federal intervention in the wireless market has fueled such "consternation and confusion" that it is harming Canada's reputation as a good place for companies to invest.

* Imperial Oil Ltd and Exxon Mobil Corp have teamed up to buy a major Alberta oil sands property from ConocoPhillips for C$751 million, ending a drought of large deals for bitumen-rich lands that had persisted since the start of the year.

* Tim Hortons Inc Chief Executive Marc Caira, who took the top job at the iconic chain on July 2, says the coffee chain needs to speed up service, streamline offerings and develop new products, including healthier choices, to win over customers and disgruntled investors.

NATIONAL POST

* An in-depth background check of Patrick Brazeau by senior officials in Prime Minister Stephen Harper's office either ignored or overlooked the conflicting addresses now at the heart of a Royal Canadian Mounted Police (RCMP) probe into the embattled senator's finances. A court filing by the lead investigator in a breach of trust probe revealed last week that the RCMP is looking into tax returns filed by the former high profile aboriginal leader.

* Prime Minister Stephen Harper's personal involvement in the Northern Gateway and Keystone pipelines may have come too late to be decisive. Neither looks a good bet to proceed right now, but he is determined to be an active and visible proponent of the Energy East project, even before it breaks ground on its new sections. While he is at pains to point out the project remains subject to a regulatory review, he gives off the sense that his government desperately needs a home run on a big economic project.

FINANCIAL POST

* Wireless incumbents BCE Inc and Telus Corp argue that if Verizon Communications Inc enters Canada, it should not piggyback on the cell towers that they have spent billions and decades to build. It is one of the so-called loopholes that the two companies are calling upon the federal government to close before the Sept. 17 spectrum auction sign-up deadline.

* Newfoundland and Labrador may be Canada's fastest growing province this year, but its stellar rise masks a dramatic decline in the oil sector. The province's three major offshore fields, Hibernia, Terra Nova and White Rose, are past their best and production from new fields is years away.

* The Canadian Radio-television and Telecommunications Commission (CRTC) on Thursday rejected the Sun News Network's bid to be carried on basic cable, casting fresh doubts on the future of the controversial upstart broadcaster. Sun says it will stay on the air while the CRTC reviews the way news channels are regulated in Canada.

China

SHANGHAI SECURITIES NEWS

-- China's futures and financial derivatives market is entering a key period of strategic development, according to the assistant chairman of China's securities regulator. Zhang Yujun from China Securities Regulatory Commission (CSRC) said this was a critical time for China to speed up the opening of the market and the innovation of new products.

CHINA DAILY

-- In the wake of crackdowns on official spending, the budgets of 18 out of 30 provinces showed on Thursday that spending on travel, vehicles and receptions had fallen compared to last year.

-- The value of domestic and outbound deals in the China merger and acquisitions market reached record highs in the first half of 2013, according to Zero2IPO Group. Chairman Ni Zhengdong said that in the first six months of the year there were 359 domestic deals worth 40.3 billion yuan ($6.58 billion), with a further 27.6 billion yuan of outbound deals.

SHANGHAI DAILY

-- More than half of the 2,500 lakes and rivers tested by authorities in Shanghai between 2010 and 2012 were found to be heavily polluted, a further knock to China's troubled record on environmental issues.

PEOPLE'S DAILY

-- In the first half of 2013, national tax auditors inspected 75,000 Chinese enterprises, covering revenues of 57.1 billion yuan ($9.33 billion). In total the department dealt with 46,000 tax evasion cases, according to figures released by the State Administration of Taxation.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Accenture (ACN) upgraded to Outperform from Neutral at RW Baird
Aviva (AV) upgraded to Buy from Neutral at BofA/Merrill
BreitBurn Energy (BBEP) upgraded to Buy from Neutral at Citigroup
Bruker (BRKR) upgraded to Buy from Neutral at BofA/Merrill
Cisco (CSCO) upgraded to Neutral from Underweight at JPMorgan
Diana Shipping (DSX) upgraded to Neutral from Underweight at JPMorgan
Geron (GERN) upgraded to Overweight from Neutral at Piper Jaffray
HeartWare (HTWR) upgraded to Outperform from Neutral at Credit Suisse
IHS Inc. (IHS) upgraded to Buy from Hold at Deutsche Bank
Kimco Realty (KIM) upgraded to Buy from Neutral at BofA/Merrill
Noah Holdings (NOAH) upgraded to Outperform from Perform at Oppenheimer
Royal Gold (RGLD) upgraded to Outperform from Sector Perform at RBC Capital
St. Jude Medical (STJ) upgraded to Outperform from Market Perform at Wells Fargo
Thoratec (THOR) upgraded to Outperform from Neutral at Credit Suisse
Tim Hortons (THI) upgraded to Buy from Hold at Canaccord

Downgrades

BG Medicine (BGMD) downgraded to Neutral from Outperform at RW Baird
Cal Dive (DVR) downgraded to Market Perform from Outperform at Raymond James
Concho Resources (CXO) downgraded to Neutral from Buy at UBS
Corcept Therapeutics (CORT) downgraded to Neutral from Outperform at Credit Suisse
Crosstex Energy LP (XTEX) downgraded to Neutral from Outperform at Credit Suisse
DeVry (DV) downgraded to Neutral from Buy at Compass Point
Deere (DE) downgraded to Sell from Neutral at UBS
Fifth Street Finance (FSC) downgraded to Outperform from Strong Buy at Raymond James
LINN Energy (LINE) downgraded to Underperform from Perform at Oppenheimer
Leap Wireless (LEAP) downgraded to Underperform from Market Perform at Raymond James
MYR Group (MYRG) downgraded to Neutral from Buy at DA Davidson
Medical Properties (MPW) downgraded to Sector Perform at RBC Capital
Suburban Propane (SPH) downgraded to Underperform from Neutral at Credit Suisse
Tetra Tech (TTEK) downgraded to Neutral from Outperform at RW Baird
inContact (SAAS) downgraded to Hold from Buy at Benchmark Co.

Initiations

Ixia (XXIA) initiated with a Buy at Jefferies
Take-Two (TTWO) initiated with a Buy at Benchmark Co.

HOT STOCKS

America Movil (AMX) offered 2.40 euros per share for KPN (KKPNY)
KPN takes note of America Movil offer, will 'carefully consider'
Verizon (VZ) gained FDA clearance for remote health monitoring solution
Philip Morris USA (MO) said Federal Court denied class certification in 'Lights' case
GameStop (GME) offering upgrade credit towards Xbox One (MSFT) games

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Magna (MGA), Great Plains Energy (GXP), Denison Mines (DNN), Willbros Group (WG), Onyx Pharmaceuticals (ONXX), Stifel Financial (SF), NVIDIA (NVDA), Air Lease (AL), priceline.com (PCLN), Lionsgate (LGF)

Companies that missed consensus earnings expectations include:
Tutor Perini (TPC), Arkansas Best (ABFS), Assured Guaranty (AGO), Edgen Group (EDG), Darling (DAR), CareFusion (CFN), Molycorp (MCP), Monster Beverage (MNST), Allscripts (MDRX)

Companies that matched consensus earnings expectations include:
AuRico Gold (AUQ), Carriage Services (CSV), Lender Processing (LPS), Envestnet (ENV)

NEWSPAPERS/WEBSITES

• With bigger, multibillion-dollar deals few and far between of late, Berkshire Hathaway’s (BRK.A) Warren Buffett increasingly favors "bolt-on" acquisitions because they increase Berkshire's earnings and enable it to use its cash pile, which stood at $36B at the end of June, the Wall Street Journal reports
• Facebook (FB) has been planning for months to dive into the lucrative market for online video ads. The holdup: CEO Mark Zuckerberg doesn't want to annoy its 1.1B members. As soon as this fall, Facebook plans to launch a video-ad service that will show members 15-second-or-less clips on both smartphones and the Web, sources say, the Wall Street Journal reports
• BlackBerry (BBRY) is warming up to the possibility of going private, as the smartphone maker battles to revive its fortunes, sources say, Reuters reports
• Onyx Pharmaceuticals (ONXX) said its process of seeking a buyer for the company is "ongoing with multiple parties engaged." The cancer drugmaker rejected an unsolicited takeover offer from Amgen (AMGN) of $120 per share as being too low, and instead launched a process to sell itself, Reuters reports
• JPMorgan Chase (JPM) is negotiating final terms of a deal with the SEC to end a yearlong probe of derivatives bets that led to the bank’s biggest trading loss ever, sources say, Bloomberg reports
• A shortage of biofuel credits needed for gasoline sales in the U.S. may lead to an increase in exports of the fuel (VLO, XOM) from America in 2014, according to the International Energy Agency, Bloomberg reports

SYNDICATE

Frank's International (FI) 30M share IPO priced at $22.00
Norwegian Cruise Line (NCLH) 20M share Secondary priced at $29.75
QEP Midstream Partners (QEPM) 20M share IPO priced at $21.00
Quality Distribution (QLTY) 4.27M share Secondary priced at $8.60
Stock Building Supply (STCK) 7M share IPO priced at $14.00
Triangle Petroleum (TPLM) 15M share Secondary priced at $6.25
World Point Terminals (WPT) 8.75M share IPO priced at $20.00

Dan Loeb continues to dispense Zen (trading) philosophy from his Bloomberg MSG header. While previously his tongue-in-cheek (and enema-in- ... well, you get the the idea) message to Bill Ackman had a cleanse-dispensing Carl Icahn middleman, his latest insight just a tad more nebulous, and should be just a little more concerning to whoever is the unlucky sod on the receiving end of Loeb's latest philosophical warning.

Now, whoever may Loeb be talking about (/sarc)?

At least we know it is not a "she", which according to the president does not exclude Janet Yellen...

P.S. in a world in which fundamentals are dead, and in which the monthly hedge fund letter is now largely worthless, we are happy to see that the hedge fund community has found a new and more entertaining way to sub-communicate with each other. Check to you David Einhorn - the time has come and gone to update that boring header.

Curious why Carl Icahn has a twitter account? Here's why:

We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come.

— Carl Icahn (@Carl_C_Icahn) August 13, 2013

Had a nice conversation with Tim Cook today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly.

— Carl Icahn (@Carl_C_Icahn) August 13, 2013

Stock surges instantly on the surprising news: after all Bill Ackman is not short AAPL to the best of our knowledge.

And while Icahn's thesis is not unique - he basically picks up on the buyback trail where David Einhorn ends - the stock is understandably happy.

Considering earlier today Larry Ellison said "Apple is going down", we are much more excited by the imminent Icahn-Ellison twitter feud than the joke that was the spat between Icahn and Ackman.

While we congratulate Carl Icahn (or is that iCahn) for once again taking over the spotlight in what has otherwise been a newsflow empty summer doldrum week, and like everyone else, are surprised by his most recent activist target, the country's on-again, off-again most valuable by market cap company, Apple, we do, as we did before when David Einhorn proposed virtually the same activist play, have some questions. Chief among them: how will AAPL fund any proposed expanded buyback or increased dividend using domestic cash?

As a reminder, from the recent 10-Q, where the company discusses its uses of cash, we learned that these were primarily "used to repurchase common stock of $18 billion,"and "to pay dividends and dividend equivalent rights of $7.8 billion." We also know previously that a large portion of the use of cash came from the Company's issuance of $17 billion in US-based bonds on April 30. Yet when netting out all other domestic cash flows, the company ended up burning a total of $2 billion in the quarter, as its domestic cash balance fell for the second consecutive quarter to $40.6 billion even as foreign cash rose to a record $106 billion. Alas, as everyone knows, for shareholder friendly activity, the offshore cash is essentially worthless unless it is repatriated and subject to very generous taxation by Uncle Sam: something we doubt Tim Cook would be happy with.

So how would AAPL fund any additional activist shareholder-friendly forays. Well, the only way it can: by issuing more bonds.

And therein lies the rub: as the chart below shows, the bonds which were issued on April 30 at par are now trading some 10% lower, primarily as a function of duration and the recent surge in interest rates - a surge which the Fed promises will be moderated, but ultimately continue as the "economy improves."

So the question becomes: for Icahn to make a quick buck some bondholder somewhere would have to be willing to lose an even quicker buck. Who will that someone be, especially if Jefferies, traditionally a willing partner to Icahn to underwrite a highly confident debt issuance letter, is unable to find the greater fool all the more so since AAPL is not a high yield issuer, at least not yet?

Intraday volatility remains extreme in almost every asset class. Today it was bonds and corn's turn as the former saw 7Y yields jump over 10bps (for the worst 2 days in 6 weeks on moar Taper talk) and the latter dropped 4% on the day to 3-year lows (on record crop expectations). Equity markets performed the now-ubiquitous intraday reversal as early shorting was squeezed back quickly to a green close. short-term VIX was smashed lower soon after the US open but faded back higher into the close to end around 12.5% (but the VIX term structure is now at 4 months steeps). FX markets were very active (JPY -2% and AUD -1% on the week) pulling the USD +0.75% but Treasuries have been battered (10Y near 2 year high yields) with 7Y adding 15bps this week (and Utility and homebuilder stocks have suffered the most). Gold dropped a little on the USD strength, silver stayed green and copper and oil were flat. Oh and Carl Icahn tweeted and pulled Tech and the Nasdaq to outperform.

US equities appeared to stumble shortly after the German confidence data - and collapsed fast after the retail-sales data in the US but once Europe closed we recovered it all... (note - many are talking about Lockhart's comments but in fact stocks did very little after he spoke)

Shorts tried at the open of cash but were quickly slapped back to reality...

Trannies suffered (as did the broad Russell 2000) but the Nasdaq was popped highe rby Icahn's AAPL exuberance...

While 7Y was the worst performer on the day, 10Y is pressing back to 2-year highs and yet another multi-sigma vol day...

FX markets have been very active...JPY is now 2% weaker on the week against the USD but from pre-open today, the USD actually leaked lower...

USD 'strength' took some ofthe surge off PMs but it appears the German confidence data was the catalyst...

Corn prices have been falling but today's almost 4% collapse was significant and drove the price back to 3 year lows...

As The FT explains:

Propitious growing conditions from Brazil to Ukraine and the US have raised hopes of a sharp rebound in world cereals stocks, easing inflation pressures and pushing food security down the policy agenda.

 

...

 

World corn, rice, soyabean and wheat production will break records this year, the US Department of Agriculture estimated this week - “We are in for an exceptionally good year, perhaps one of the best in the last four or five years in terms of crop production,”

 

...

 

The US government this year predicts a record domestic corn crop of almost 350m tonnes, up 28 per cent from 2012, and the third biggest soyabean crop, of 88.6m tonnes.

 

...

 

“We’re clearly in a transition from a very high-priced, super-tight stocks environment to one of possible sizeable surpluses” But - US crops, planted late due to wet spring weather, could still be vulnerable to summer heat or an early frost.

And as we noted previously - The Hindenburg Omen struck once again...

But AAPL got the iCahn nod...

and filled the gap to Q4 earnings' call...

oh and in case you wondered what was used to lever stocks up this afternoon as bonds sold off and the USD weakened and credit widened and VIX lifted...

Charts: Bloomberg

Bonus Chart: The VIX Term Structure has steepened dramatically... and tends to signal the stallling of a trend in stocks...

The amusing news overnight was that following slightly better than expected Q2 GDP data out of Germany (0.7% vs 0.6% expected and up from 0.0%) and France (0.5% vs 0.2% expected and up from -0.2%), driven by consumer spending and industrial output, although investment dropped again, which meant that the Eurozone which posted a 0.3% growth in the quarter has "emerged" from its double dip recession. The most amusing thing is that on an annualized basis both Germany and France grew faster than the US in Q2. And they didn't even need to add iTunes song sales and underfunded liabilities to their GDP calculation - truly a miracle! Or perhaps to grow faster the US just needs higher taxes after all? Of course, with the all important loan creation to the private sector still at a record low, and with the ECB not injecting unsterilized credit, the European depression continues and this is merely an exercise in optics and an attempt to boost consumer confidence.

Don't buy the propaganda? You are not alone - even Goldman said to not take the data at face value: "The solid Q2 GDP print should not be taken at face value as it partly reflects a “statistical payback”. Moreover, the weakness in French investment spending is a reason for caution. More generally, the Euro area still has to cope with balance sheet adjustment required in both the private and public sectors, and continuing fiscal austerity will continue to weigh on demand for some time to come." We give Europe at most two quarters before the net foreign capital rotation fades and the continent reenters an unprecedented triple dip "recession."

More on the GDP breakdown from Goldman:

The country breakdown showed that outturns in Germany, France and Italy were all stronger than consensus expectations. Germany and France recorded robust positive growth in Q2, while Italy and Spain saw small declines (Chart 1):

• Germany: +0.7%qoq in Q2 after a flat reading in Q1 (revised down from +0.1%qoq). This was above the consensus expectation of a +0.6%qoq increase (GS: +0.8%qoq). The statistical office does not provide a breakdown by expenditure components (these will be released on August 23), but it suggested that domestic demand was the main driver of growth in Q2: private and public consumption rose on the quarter, and investment spending increased markedly – likely reflecting some "weather-related catch-up effects following the unusually long and cold winter". The contribution from net trade to Q2 GDP was moderate.
• France: +0.5%qoq in Q2 after -0.2%qoq in Q1, above expectations (Cons:+0.2%qoq; GS: +0.1%qoq). The breakdown by expenditure components shows that private consumption picked up markedly, rising 0.4%qoq after -0.1%qoq, and that public consumption continued to support activity (+0.5%qoq after +0.3%qoq). However, investment continued to decline, although at a slower pace than in Q1 (-0.5%qoq in Q1 after -1.0%qoq). Overall, the contribution of total domestic demand (excluding inventory changes) to GDP growth was solid, at +0.3pp. The net trade contribution to growth was flat, as imports offset a strong rebound in exports (+2.0%qoq, driven by a pick-up in transport materials). Changes to inventories pushed up French GDP growth by 0.2pp in Q2.
• Italy: -0.2%qoq in Q2 after -0.6% in Q1 (published on August 6). This was also above the consensus expectation of a 0.4%qoq decline (GS: -0.3%qoq). Italy’s national statistical office does not provide a breakdown of GDP with its preliminary estimate. A detailed breakdown of the data will not be available until September 10.
• Spain: -0.1%qoq in Q2 after -0.5%qoq in Q1 (published on July 30). The outturn was in line with consensus expectations. The preliminary data release provides no breakdown in terms of output by sector or by expenditure component. We will have a clearer idea of the underlying rate of contraction in Spain when we receive an expenditure breakdown on August 29.

Eurostat does not publish a GDP breakdown by demand component until its second estimate of GDP (published on September 5), making it difficult to assess at this point what drove underlying Euro area growth. However, based on the information from Germany and France, private and public consumption seem to be the main candidates.

 

In other words, it is unclear what is driving European growth. It just "is." Wake us if we have seen this move before time and time again.

The full overnight market recap via RanSquawk

• BoE MPC voted 9-0 to keep QE unchanged at GBP 375bln and 9-0 to keep interest rates unchanged at 0.50%, 8-1 for forward guidance. BoE's Weale wanted shorter time horizon for 2.5% CPI knock-out clause than 18-24 months.
• Eurozone GDP SA (Q2 A) Q/Q 0.3% vs. Exp. 0.2% (Prev. -0.2%, Rev. to -0.3%).
• 15 people killed after Egyptian security forces attack pro-Mursi Cairo protest camps.

Market Re-Cap

In spite of the release of better than expected Eurozone based GDP reports, equities fluctuated between gains and losses, with Bunds also reversing the initial lower open as market participants sought value in fixed yielding assets following an aggressive sell off yesterday. As a result, the excessive rise in money market rates yesterday which saw the 1y/1y EONIA forward rate climb to 0.4860 - highest since late June, also encouraged profit taking related flows which in turn weighed on the EUR this morning. However more so it was the release of the BoE meeting minutes, where Martin Weale dissented and wanted a shorter time horizon for 2.5% CPI knock-out clause than the agreed 18-24 months that drove EUR lower. In turn, GBP was seen bid across the board, as the minutes were perceived to be more hawkish than expected. UK curve reversed some of the aggressive flattening which was evident following the QIR where Carney announced that the Bank is to implement forward guidance. Going forward, market participants will get to digest the release of the latest PPI report, as well as the weekly DoE Inventories data. Also of note, Macy’s and Cisco are due to report earnings today.

Asian Headlines

China plans faster capacity cuts even as economic activity slows, according to an official. The government will complete by the end of 2014 its overcapacity reduction plan for the 5 years through to 2015.

EU & UK Headlines

BoE MPC voted 9-0 to keep QE unchanged at GBP 375bln and 9-0 to keep interest rates unchanged at 0.50%, 8-1 for forward guidance.
- BoE's Weale wanted shorter time horizon for 2.5% CPI knock-out clause than 18-24 months.
- Most members think UK short-term market interest rates out of line with economic outlook, some do not.
- Some members still believe case for more QE compelling, but want to gauge impact of guidance before raising asset purchases.

UK ILO Unemployment Rate (Jun) 3M/3M 7.8% vs. Exp. 7.8% (Prev. 7.8%)

UK Jobless Claims Change (Jul) M/M -29.2k vs. Exp. -15.0k (Prev. -21.2k, Rev -29.4k)

Eurozone GDP SA (Q2 A) Q/Q 0.3% vs. Exp. 0.2% (Prev. -0.2%, Rev. to -0.3%)

German GDP GDP SA (Q2) Q/Q 0.7% vs. Exp 0.6% (Prev. 0.1%, Rev. 0.0%)

French GDP (Q2 P) Q/Q 0.5% vs. Exp. 0.2% (Prev. -0.2%)

German BDI Industry Federation cuts German 2013 growth forecast to 0.5% from 0.8%

Germany sells EUR 3.231bln 1.5% 2023, b/c 1.3 (Prev. 1.6) and avg. yield 1.80% (Prev. 1.57%), retention 19.23% (Prev. 20.25%) - Highest yield since February 2012.

US Headlines

Fed's Lockhart said QE taper possible at any of next three meetings; don't expect to have enough data by September to be able to lay out full phase out of asset purchase plan. Said decisions to reduce asset buys will be data dependent. He added that disconnect between steady payrolls growth and weak GDP contributes to lack of clarity in the data.

Equities

In spite of the release of better than expected Eurozone based GDP reports, equities fluctuated between gains and losses, with Bunds also reversing the initial lower open as market participants sought value plays following an aggressive sell off yesterday. FTSE-100 index underperformed its peers, largely due to the fact that a number of large cap stocks are were trading ex-dividend.

FX

GBP was seen bid across the board, as the minutes from the most recent BoE meeting were perceived to be more hawkish than expected. UK curve reversed some of the aggressive flattening which was evident following the QIR where Carney announced that the Bank is to implement forward guidance. SNB's Zurbruegg said CHF cap will remain in place as long as necessary, that the worst has been avoided with CHF cap and further added that CHF remains at a high level.

Commodities

A major US oil and gas trade group asked the Obama administration on Tuesday to ease the federal bio-fuel mandate for 2014, citing the potential for serious economic harm if ethanol targets exceed 10% of gasoline demand.

Pacific crude exports in Oct seen slightly lower than previous month. Exports of sweet crude and condensate from Australia, Papua New Guinea and East Timor will be down about one to one-and-a-half cargoes in October at 10.5 to 11, down from 12 in Sept as maintenance reduces supply, trade sources said on Wednesday.

Libya told its customers on Tuesday it could make no promises on crude deliveries next month as on-off strikes paralysed its major sea terminals. Labour unrest gripping Libya's oilfields and ports has cut output to the lowest since 2011 war. Some analysts say it is well below 500,000 bpd compared with 1.3mln bpd in June. This morning it was also reported that 15 people killed after Egyptian security forces attack pro-Mursi Cairo protest camps.

API US Crude Oil Inventories (Aug 9) W/W -990K vs. Prev. -3700K
- Cushing Crude Inventory (Aug 9) W/W -1400K vs. Prev. -2200K
- Gasoline Inventories (Aug 9) W/W 1700K vs. Prev. -971K
- Distillate Inventory (Aug 9) W/W 1100K vs. Prev. 1500K

Glencore Xstrata says H1 copper and gold output rose, zinc declined.

* * *

Finally, as usual, the complete recap of the day's events comes from DB's Jim Reid

Over the last 24 hours we’ve seen a fairly sharp selloff in rates markets - off the back of stronger economic data and more taper-talk from the Fed - while equity and credit markets remained relatively resilient. In the core bond markets, 10 year yields saw a sharp increase including Bunds +11bp, Gilts +13bp and OATs +11bp. Across the Atlantic, 10yr USTs also saw a selloff (+10bp to 2.71%), where yields moved back up to near-two year highs. 10yr UST yields are now at the top of the recent 2.5% to 2.75% trading range while 2s/5s and 2s/30s curves continue to steepen. In EM sovereigns, Mexican rates were amongst the underperformers, with the continuing disappointment over the government’s oil market changes and a rally in the USD driving weakness in EM bonds.

Equities and credit on the other hand have been relatively resilient amid the back up in global rates. The Stoxx600 (+0.56%) recorded its 10th gain in the last twelve sessions on the back of gains in mining stocks and cyclicals. The better than expected ZEW survey also boosted equity market sentiment on the continent. The S&P500 (+0.28%) closed higher as Apple (+4.75%) moved sharply higher for the second day in a row after billionaire investor Carl Icahn tweeted that he had built a stake in the company. EM equities also fared strongly with the MSCI EM index up 0.85%. In credit, synthetic indices on both sides of the Atlantic closed marginally tighter on the day.

Much of the UST selloff yesterday came after the release of retail sales data for July. The headline number printed at 0.2%mom which was slightly below the
0.3% expected by the market. But DB’s economists point out that the weakness in the headline stemmed mostly from motor vehicle sales (-1.0% vs +2.9% previous). Indeed ex-autos, retail sales were up 0.5%mom versus consensus estimates of 0.4%. The details of the retail report were also fairly firm with most categories showing solid gains including food & beverage (+0.8% vs. +0.2%), health & personal care (+0.7% vs. +0.1%), clothing (+0.9% vs. unch.), sporting goods & hobbies (+1.0% vs. -0.1%) and bars & restaurants (+0.6% vs. -0.5%). On a more micro level, HK-listed company Li & Fung, which is described as the world’s largest supplier of clothes and toys to retailers mostly in the US, said that the outlook for the second half is solid and forecast that operating profit would expand by 3-4 times that of the first half of 2013 – perhaps a sign of stronger retail demand in the 2H.

Yesterday’s Fedspeak didn’t help the price action in USTs. Atlanta Fed President Dennis Lockhart indicated that the Fed may be ready to taper at any of their next few meetings. But his comments did contain a few dovish snippets including his comment that “a decision to proceed -- whether it is in September, October, or December -- ought to be thought of as a cautious first step”. Lockhart also said that he didn’t expect the Fed to have enough data by September to layout a full phase-out of QE. He also singled out the “uneven” performance of the US economy with steady payrolls data but weak GDP which is contributing to the “lack of clarity in the data”. Possibly contributing to the selloff in treasuries, a Bloomberg report suggested that supporters of Janet Yellen are outnumbered by supporters of Larry Summers among leading advisers to President Obama. The article said that the probability of Summers getting the Fed’s top job is 60%, Yellen is at 35% and others at just 5%.

Moving on overnight markets, 10-year government bond yields in Australia, New Zealand and South Korea are following the lead of their US/European counterparts and are up 9bp, 9bp and 5bp on the day as we type. JGBs are outperforming on a relative basis (+1bp to 0.75%) and USTs have unwound some of their losses from yesterday, trading 1bp firmer at 2.71% this morning. Regional credit markets are broadly unchanged. In equities, markets have  been quiet with Hong Kong markets shut for the whole day due to a typhoon warning. As we go to print, the Nikkei is down 0.6% while the KOSPI and Shanghai Comp are 0.1% and 0.25% higher respectively. In further tentative signs of a recovery in activity in China, Chinese import iron ore prices at the port of Tianjin hit a five month high of $142/metric tonne yesterday. Other Chinese growth sensitive commodities such as copper and nickel are up 9% and 11% from the recent lows, respectively.

Turning to the day ahead, the focus on the Eurozone is on Q2 GDP numbers. Markets are expecting a 0.6% qoq number for Germany, 0.2% for France and 0.2% for the Eurozone as a whole. In the UK, the latest minutes from the BoE will be closely read following the introduction of the Bank’s forward guidance.The UK labour report is also scheduled today. The US data the PPI and mortgage applications are the highlights of today’s calendar.

• Vocal billionaire activist IRR - 150x: Icahn bought $1 billion of AAPL stock, seeks $150 billion buyback (BBG)
• BlackBerry Said to Have Sought Buyers Since 2012 (BBG) - for a phone or the entire company?
• IPhone Fingerprint Reader Talk Boosting Biometric Stocks (BBG) - also, the NSA will need to grow its Utah data center
• UPS Jet Crashes in Birmingham, Ala. (WSJ)
• America's Farm-Labor Pool Is Graying (WSJ)
• Hong Kong Lowers Storm Signal as Typhoon Closes on China (BBG)
• Indian submarine explodes in Mumbai port (FT)
• BofA Banker Sued by Regulator Later Joined Fannie Mae (BBG)
• Software that hijacks visits to YouTube uncovered (FT)
• Chinese Billionaire Huang Readies Iceland Bid on Power Shift (BBG)
• China to launch fresh pharmaceutical bribery probe (Reuters)
• Defeat at J.C. Penney Hurts Ackman as Performance Trails (BBG)

Overnight Media Digest

WSJ

* The Justice Department unexpectedly moved to block the merger of American Airlines parent AMR Corp and US Airways Group Inc threatening to upend what was viewed as the final step in the consolidation that has helped return U.S. airlines to profit after years of heavy losses.

* JPMorgan Chase & Co trader Bruno Iksil, known as the "London whale", has reached an agreement with federal authorities to avoid criminal prosecution over a $6 billion trading loss, but two former colleagues are expected to be charged as soon as Wednesday, according to people close to the case.

* Investor Carl Icahn has grabbed a stake valued at over $1.5 billion in Apple Inc believing that more cash should be falling from the tech giant's branches. While Apple earlier this year announced a large buyback, Icahn said in an interview on Tuesday that he wants to see it happen right away, near the current share price, which he considers cheap.

* Hedge-fund manager William Ackman has resigned from the board of J.C. Penney Co Inc, bringing an end to an unusually public rift among directors that had threatened the struggling company's turnaround efforts. The board also declared its "overwhelming support" for Chairman Thomas Engibous and Chief Executive Myron Ullman, both of whom Ackman had argued should be replaced.

* Antero Resources Inc, an energy company backed by New York private-equity firms, plans to spend more than half a billion dollars on a pipeline. But the 80 miles of pipe won't transport oil or gas. They will carry water from the Ohio River to fracking sites in West Virginia and Ohio. The project is a costly wager that the hydraulic-fracturing industry's thirst for reliable sources of water will grow over the next few years.

* Whirlpool Corp agreed to buy a majority stake in Chinese home appliances maker Hefei Rongshida Sanyo Electric Co for $552 million, giving Whirlpool a set of appliance brands that span the Chinese market where it has struggled to grow.

* The pressure on big auto makers to squeeze more miles out of a gallon of gas is powering a surge in profits for the suppliers of turbochargers, fuel injectors and other lean parts. Once dismissed by Wall Street, companies including BorgWarner Inc, Delphi Automotive PLC, Federal-Mogul Corp and TRW Automotive Holdings Corp are today beating Wall Street's profit forecasts, hiring workers and making acquisitions.

* H.J. Heinz Co is eliminating 600 office positions in the U.S. and Canada, or 9 percent of the company's workforce in North America. The cuts include 350 jobs in Pittsburgh, where Heinz is based.

FT

Yields on benchmark British government bonds touched a two-year high amid doubts about whether the Bank of England will be able to keep the lid on interest rates until 2016.

United States Department of Justice sued to block American Airlines and US Airways' proposed merger to create the world's biggest airline, saying it would push up fares.

Brussels' competition authority has called for a single pan-European watchdog instead of 28 national telecoms regulators, in a sharp rebuke of the proposed reforms from Neelie Kroes, the bloc's telecoms chief.

Foxtons, the private equity-backed British estate agent, will file for an initial public offering as early as August 27.

CVC Capital Partners agreed to buy British home appliance insurer Domestic & General from its private equity owner Advent International, betting on international expansion from the UK.

FitBit, the maker of health and fitness tracking devices, has raised $43 million in venture capital funding as it gears up for companies such as Apple and Samsung to enter the "wearable technologies" field.

NYT

* After a decade of rapid consolidation in the U.S. airline industry, the Justice Department filed a lawsuit on Tuesday to block the proposed merger between American Airlines parent AMR Corp and US Airways Group Inc, which would create the world's largest airline. It underscores a newly aggressive approach by the Justice Department's antitrust division, which has been more closely scrutinizing proposed mergers as the economy recovers.

* Hedge fund titan William Ackman resigned this week from the board of J.C. Penney Co Inc, just days after he began a public rebellion against his fellow directors over the future of the company. At the same time, he has made a very public bet against Herbalife Ltd, the nutritional supplements company, that has not gone his way over the last several months. By some counts, Ackman has lost about $1 billion on both companies.

* Private equity firm Kohlberg & Co, which offered last month to buy Steinway Musical Instruments Inc, said on Tuesday that it would not seek to raise its bid in the face of a rival offer. That puts Steinway in a position to complete a buyout deal with the rival bidder, which offered this week to buy the company for $38 a share, or about $475 million. The rival bidder, which has not been publicly identified, is the hedge fund Paulson & Co, according to a person briefed on the matter. ()

The Senate's committee on homeland security sent a letter this week to the major financial regulators and law enforcement agencies asking about the threats and risks related to virtual currency like bitcoin. These currencies, whose popularity has grown in recent years, are often used in online transactions that are not monitored by traditional financial institutions.

* The Public Company Accounting Oversight Board is proposing a major overhaul of how company audits are reported to the public, a move that could provide investors with deeper insights into the health of corporations.

* On Wall Street, strange financial products sometimes exist not because they are good for investors or companies, but because they offer their promoters a way to profit. Silver Eagle is a special purpose acquisition company, or SPAC, which raises money through an IPO and then casts a wide net in search of a private company to buy. Silver Eagle's IPO is the largest in the past seven years for a SPAC and sure to earn its promoters millions, but the outcome is not so clear for its investors or even the company itself.

* Private equity firm Advent International agreed on Tuesday to sell Domestic and General, an extended warranty company, to CVC Capital Partners for about $1.2 billion, according to a person with direct knowledge of the matter.

Canada

THE GLOBE AND MAIL

* Canadian Industry Minister James Moore is firing back at Rogers Communications Inc, BCE Inc and Telus Corp for their public relations efforts to press Ottawa into reversing a controversial wireless policy, calling it a "dishonest attempt" to skew public debate through "misleading campaigns".

* The release of a detailed audit of Pamela Wallin's expense claims is deepening political problems for the Stephen Harper government, with the Saskatchewan senator accused of billing more than C$121,000 ($117,000) in questionable expenses including dozens of trips related to personal and partisan events since taking office.

Reports in the business section:

* A massive penny stock fraud scheme that bilked Canadian and foreign investors of more than $140 million was masterminded by four Canadians and carried out with the help of five Americans, the U.S. Department of Justice alleged on Tuesday. One of the Canadians was arrested in Ontario and another one was among six suspects arrested in the United States, authorities said.

* Toronto-based Spin Master Ltd has acquired the iconic Meccano construction set line, with the ambitious goal of challenging Lego AS's dominance in the category, at a time when toy sales are slipping overall. Toy makers have been struggling for years to pick out winners in a landscape that is increasingly dominated by Angry Birds and other popular digital applications.

* Shrugging off the notion of an industrial rivalry, Mexican Ambassador Francisco Suarez says Canadian companies will enjoy enormous opportunities as his country seeks to rejuvenate its energy sector with sweeping, though politically challenging, liberalization. The ambassador rejected the notion that Mexico would become an increasingly threatening competitor for Canadian oil companies eager to expand their deliveries on the U.S. Gulf Coast.

NATIONAL POST

* New Democratic Party Leader Thomas Mulcair suggests the rail disaster that killed 47 people in the Quebec town of Lac-Megantic last month may have resulted from years of industry deregulation. In a speech before members of the United Food and Commercial Workers International union in Chicago, Mulcair laced into Conservatives on both sides of the border who say organized labor is a thing of the past and that the economy is best served when left to its own devices.

FINANCIAL POST

* The Canadian Transportation Agency on Tuesday ordered Montreal, Maine and Atlantic Railway Ltd to cease operations in Canada as of next week after determining the railroad no longer had the adequate insurance to continue to operate in the country in the aftermath of the Lac-Mégantic disaster.

* BlackBerry Ltd's announcement on Monday that it's considering takeover bids followed almost a year of advisers unsuccessfully canvassing potential buyers in search of a deal, two people with knowledge of the matter said. In recent months, as BlackBerry sales and subscriber numbers deteriorated, bankers from JPMorgan Chase & Co and RBC Capital Markets quietly contacted possible bidders and found little interest in buying the whole company.

* General Motors of Canada Ltd has had the most difficulty of the Detroit Three in Canada coming out of the recession. It's difficult to point a finger at just one issue, with its cars winning accolades, but still fighting for market share in Canada. President Kevin Williams said he wasn't about to chase market share by flooding the market with low margin fleet sales, or overly aggressive incentives either.

China

CHINA SECURITIES JOURNAL

- Huayu Automotive Systems Co Ltd said it plans to acquire 50 percent shareholding in Yanfeng Visteon Automotive Trim Systems Co Ltd for 5.7 billion yuan ($931.1 million).

SHANGHAI SECURITIES NEWS

- The Central Bank has suspended Baoshang Bank's licence for its interbank bond clearing agency business for two years from Tuesday, according to a notice it released through the Foreign Exchange Trading Center.

- China Insurance Regulatory Commission plans to develop a new business evaluation index system to assist insurance companies with their management and methods of expansion, according to sources.

- China should guide private capital into telecommunications and defence, minister of industry and information technology Miao Wei said on Tuesday at a press conference. Beijing will also push ahead with efforts to cull excess industrial capacity a year earlier than planned even as economic expansion slows.

PEOPLE'S DAILY

- As at the end of June, internet users in China hit 590 million, of which 464 million used their mobile phones for access, according to statistics released by the Ministry of Industry and Information Technology.

SHANGHAI DAILY

- Foreign equity investment into China's financial institutions fell to $442 million in the second quarter, the lowest in more than a year, according to data released by the State Administration of Foreign Exchange on Tuesday.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

American Woodmark (AMWD) upgraded to Buy from Neutral at Longbow
Cincinnati Bell (CBB) upgraded to Neutral from Underperform at BofA/Merrill
Cullen/Frost (CFR) upgraded to Market Perform from Underperform at Raymond James
GlaxoSmithKline (GSK) upgraded to Neutral from Underweight at JPMorgan
Hovnanian (HOV) upgraded to Buy from Neutral at UBS
JAKKS Pacific (JAKK) upgraded to Market Perform from Underperform at BMO Capital
MarkWest Energy (MWE) upgraded to Buy from Neutral at Goldman
Marvell (MRVL) upgraded to Buy from Neutral at B. Riley
Rowan Companies (RDC) upgraded to Strong Buy from Neutral at ISI Group
Royal Dutch Shell (RDS.A) upgraded to Overweight from Equal Weight at Barclays
SINA (SINA) upgraded to Buy from Sell at Citigroup
Statoil (STO) upgraded to Overweight from Equal Weight at Barclays
USA Compression (USAC) upgraded to Outperform from Market Perform at Wells Fargo

Downgrades

Broadridge (BR) downgraded to Underweight from Neutral at JPMorgan
Coca-Cola HBC (CCH) downgraded to Neutral from Buy at Goldman
Delta Air Lines (DAL) downgraded to Neutral from Overweight at JPMorgan
EV Energy (EVEP) downgraded to Sector Perform from Outperform at RBC Capital
Ensco (ESV) downgraded to Neutral from Buy at ISI Group
Global Payments (GPN) downgraded to Neutral from Overweight at JPMorgan
Millennial Media (MM) downgraded to Hold from Buy at Canaccord
Noble Corp. (NE) downgraded to Buy from Strong Buy at ISI Group
PAREXEL (PRXL) downgraded to Underperform from Neutral at Sterne Agee
PetroLogistics (PDH) downgraded to Neutral from Buy at UBS
Transocean (RIG) downgraded to Neutral from Strong Buy at ISI Group
US Airways (LCC) downgraded to Neutral from Overweight at JPMorgan
USA Compression (USAC) downgraded to Neutral from Buy at Goldman
United Microelectronics (UMC) downgraded to Sell from Neutral at Goldman
WEX Inc. (WEX) downgraded to Underweight from Neutral at JPMorgan
Western Union (WU) downgraded to Underweight from Neutral at JPMorgan

Initiations

Cerner (CERN) initiated with a Buy at KeyBanc
Dresser-Rand (DRC) initiated with an Outperform at Raymond James
MedAssets (MDAS) initiated with a Hold at KeyBanc
Quality Systems (QSII) initiated with an Underweight at KeyBanc
Spectranetics (SPNC) initiated with an Overweight at JPMorgan
athenahealth (ATHN) initiated with a Hold at KeyBanc

HOT STOCKS

Standard & Poor's revised its outlook on Advanced Micro Devices (AMD) to negative from stable
RadioShack (RSH) can avoid restructuring if it can pay current lenders (WFC, BAC, GE), Reuters reports
Baidu (BIDU) to acquire NetDragon subsidiary 91 Wireless
NASDAQ OMX's (NDAQ) BWise, Atheeb NetSol (NTWK) agreed to partnership
Cubis (CBST) commenced tender offer for all outstanding Trius Therapeutics (TSRX) shares

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Towers Watson (TW), Luxoft (LXFT), Supernus Pharmaceuticals (SUPN), Myriad Genetics (MYGN), Jack Henry (JKHY), Athersys (ATHX), Millennial Media (MM), Netlist (NLST), Brocade (BRCD)

Companies that missed consensus earnings expectations include:
Chimerix (CMRX), ExOne (XONE), Regulus Therapeutics (RGLS), SeaWorld (SEAS)

Companies that matched consensus earnings expectations include:
Applied Industrial (AIT), Phototronics (PLAB), IMRIS (IMRS), JDSU (JDSU), Cree (CREE)

NEWSPAPERS/WEBSITES

• Hollywood (FOX, SNE, VIAB, TWX) prevailed in a dispute with China's state-owned film distributor China Film Group Corp. that held up hundreds of millions of dollars in box-office payments due U.S. studios, as a standoff over a new value-added tax was resolved, the Wall Street Journal reports
• Weyerhaeuser Co.’s (WY) plan to market its home building unit, valued at over $3B, has accelerated as prospective bidders submitted preliminary expressions of interest in a deal, sources say, the Wall Street Journal reports
• Japanese airline ANA Holdings (ALNPY) said it had found an electrical wiring problem in the fire extinguishers of the engines of three of its Boeing (BA) Dreamliner jets, Reuters reports
• South Africa's biggest union for the manufacturing sector, NUMSA, plans to launch a national strike in the auto industry (F, TM) beginning August 19 after wage negotiations deadlocked, Reuters reports
• American Airlines’ (AAMRQ) chances of leaving bankruptcy as a strong competitor with its biggest peers were left in jeopardy yesterday when the Justice Department sued to block a merger with US Airways Group (LCC), Bloomberg reports
• Liberty Global’s (LBTYA) acquisition of cable operator Kabel Baden-Wuerttemberg GmbH was overturned by a German court that said the competition authority didn’t demand tough enough concessions, Bloomberg reports

SYNDICATE

BioScrip (BIOS) files to sell 6.8M shares of common stock for holders
Cancer Genetics (CGIX) 1.5M share Secondary priced at $10.00
Diamondback Energy (FANG) files to sell 4M shares of common stock
Envision Healthcare (EVHC) 42M share IPO priced at $23.00
GenMark (GNMK) 7.622M share Secondary priced at $9.84
JA Solar (JASO) files $96M registered direct offering
Northern Tier (NTI) announces offering of 11.5M common units
PennyMac (PMT) files to sell 11.3M shares of common stock
Roadrunner (RRTS) 4.3M share Secondary priced at $27.00
The Medicines Co. (MDCO) 5.785M share Secondary priced at $30.25
WageWorks (WAGE) 2.968M share Secondary priced at $40.45

ACTIVIST/PASSIVE FILINGS

Appaloosa gives quarterly update on stakes: NEW STAKES - Chicago Bridge & Iron (CBI), Axiall (AXLL), and Hertz (HTZ). INCREASED STAKES - Goodyear Tire (GT), Citgroup (C), Prudential (PRU), and Fluor (FLR). DECREASED STAKES - Apple (AAPL), Microsoft (MSFT), AIG (AIG), HCA Holdings (HCA), and United Continental (UAL). LIQUIDATED STAKES - Two Harbors (TWO), MFA Financial (MFA), and Silver Bay Realty Trust (SBY).

The cluster of Hindenburgs is indicating a very worried market (for example 99 New Highs and 231 New Lows) and for a change a Fed speaker was unable to provide the headline-reading BTFD ammo to save us from the drop in stocks. The 6th down day in the last 8 in stocks and red on the month-to-date screens is not something we are used to seeing. The USD was flat to slightly lower on the day (even as AUD surged and JPY leaked higher) as were Treasury yields (which took a pause after 2 days of being smashed higher). While bonds were flatish, homebuilders and utilities stocks were jammed lower once again (as AAPL pulled Tech and the Nasdaq to outperform again). Copper and oil were also flat on the day but gold saw some improvement (over $1330) and Silver surged 2% (up over 6% on the week now - biggest week since Oct 2011). Yesterday's near-record steepness in VIX's term structure that we warned about seems to have been followed by the usual short-end rip as VIX broke back above 13%.

A late-day confirmation from Bullard of the "Need Moar Data"-before-we-taper meme that Lockhart noted yesterday (and ripped the S&P 9 points higher) only managed to scare stocks up 3 points to VWAP from where they fell back rapidly for one of the weakest closes we have seen in a while... (with the S&P and Dow cash down its second biggest in 7 weeks)

This is the first close at the lows of the day since July 31st.

The S&P is clinging to unch for August while Trannies and the Dow are in the red. Nasdaq remains comfortably green on the shoulders of AAPL on the shoulders of Icahn...

Treasuries paused today after 2 days of significant selling...

and FX markets rolled over from Monday and Tuesday's trend...

Commodities limped higher in general on a slightly weaker USD (and JPY strength) but silver was the winner...

Silver is on a big run...

and as a reminder...

The equity market internals suggest great confusion...

Is it any wonder?

and in case you are wondering "where else are you going to put your money (than US stocks)" - it seems the answer is... European Peripheral debt...

Charts: Bloomberg

Bonus Chart: What happened the last time AAPL rallied like this? In the last three weeks, AAPL has rallied an impressive 18.8%. It seems enough, with Carl iCahn buying 0.2% of the company and a new iPhone just around the corner, to spur hope and faith that "we're back baby." The only trouble with that perception is that the last 2 times AAPL's stock zoomed so exuberantly fast, it did not end well... In April 2012, AAPL dropped 18% in the following 3 weeks, and the other time was September 2012 which marked the all-time (generational) high. Trade accordingly...

Bonus Bonus Chart: Maybe Tim Cook should raise equity and pay down debt... monetize the 15% gain on the bonds (trading at 85c on the dollar) and use record cheap equity to fund the bond buyback...

It's a Carl iCahn world, and 13-Fs are nothing more than 45 day old tweets. Also, with Ben Bernanke Chief Risk Manager of the developed world, there is absolutely no point to be invested in hedge funds (why - there is simply no risk, until Ben loses control, then no amount of hedging will help anyone), and as such what "hedge" funds are buying is irrelevant. But since the cottage industry of alphacloners still exists, here, via RanSquawk and Fly, is the full June 30 holding recap of the usual suspects.

Paulson:

• Exited Stakes in SNI, WFC, COF, REP, PNK
• Took Stakes in FDO, HES, IOC, MTG, VOD, TMO, CTB, SFD, KOG, RUE
• Cut Stakes in DLPH, HIG, MYL, HCA, RHP
• Boosted Stakes in PXD, AET, BPGP, RUN, CVC
• Reduced Stake in SPDR Gold Trust

Soros Fund

• Exited Stakes in LCC, GDX, MOS, GLD, HAL
• Took Stakes in HLF, JCP, CA, OUTR, OXY
• Cut Stakes in PXD, ACTG, DAL, RHT, CTXS
• Boosted Stakes in GOCIG, UAL, DISH, NTAP, UAL
• Sold Entire SPDR Gold Trust Stake (which was $80MM in an $8.6bn fund)

Greenlight:

• Exited Stakes in STX, MSFT, CBS, HES, ABX
• Took Stakes in VOYA, LBTYA, RAID
• Cut Stakes in CI, CSC, DLPH, DST, AHL
• Boosted Stakes in AET, IACI, SPR, BIOF, GDX

Third Point:

• Exited Stakes in MUR, DLPH, ABBV, LNG, AGU
• Took Stakes in CF, ELN, DIS, MPC, WMB
• Cut Stakes in IF, AIG, TIF, FOXA, APC
• Boosted Stakes in TMO, TIBX, BID
• Sold Its Entire Stake in SPDR Gold Trust

Berkshire Hathaway

• Took stakes in DISH, SU
• Boosted Stakes in NOV, BK, GM, CBI, USB, WFC

Pershing Square

• Exited Stake in MDLZ in 2Q
• Shows Reduced Stakes in PG, GGP, MATX

Fairholme:

• Exited MBI, CNQ, OSHWQ, AGO Stakes
• Took Stakes in LNC, HIG
• Cut CHK, BRK/B, LUK, JOE Stakes
• Boosted Stakes in AIG, BAC, GNW

SAC Capital:

• Exited Stakes in PNRA, CLF, DOW, SFD, MDVN
• Took Stakes in SIG, CLVS, SLCA, PE, LII
• Cut T, SIRI, CNX TXT
• Boosted Stakes in CLR, SLB, GILD

Sources: RanSquawk, Fly

You know, we are actually starting to feel sorry for Ackman. Somehow he has become the most universally hated hedge fund manager in the world.

NYT's thesis that Ackman's actions prove something is wrong with activism is specious. His actions prove only something is wrong with Ackman

— Carl Icahn (@Carl_C_Icahn) August 15, 2013

Actually, naah. Nevermind.

Recall from February:

That Icahn is out there. He can't be bargained with. He can't be reasoned with. He doesn't feel pity, or remorse, or fear. And he absolutely will not stop, ever, until Ackman is destroyed.

The Hilsenrumor turned out to be a Hilsenstocktease, and with a closing that will leave many wondering "why hast he forsaken us" and ES going into the weekend at the lows, stocks end their worst week since November.

Spread by sectors, the week's best performer were tech stocks which were dragged higher thanks to a Carl Icahn tweet and closed the week nearly unchanged. On the other end of the spectrum: utilities, which were down by a whopping 4%.

But while stocks largely went nowhere, the news of the day was the bond complex, and especially the 10 Year, which dribbled lower all day and the yield soared wider to fresh two year highs, only to be saved in the last hour courtesy of the abovementioned rumor which turned out to be fake. Still, as the chart below shows, the carnage among bonds was massive, although nowhere more so than at the Fed, which over the past 3 months has booked a P&L of over -$300 billion on its portfolio. If, that is, the world's largest hedge fund marked to market of course.

Yet it wasn't all doom for investors. Those who have been patiently holding on (or jumping into) precious metals had the best week in months, with silver surging higher by double digits, and gold returning to levels last seen since the first Bernanke taper announcement. Considering the plouging the USD took this week, we expect that as the market starts pricing in the untaper, the upside case before gold and silver will only be made that much more substantial in the coming weeks.

If AAPL is indeed what broke the NASDAQ, here comes Uncle Carl to make sure there is an early AAPL bid just as the NASDAQ reopens.

Spoke to Tim. Planning dinner in September. Tim believes in buyback and is doing one. What will be discussed is magnitude.

— Carl Icahn (@Carl_C_Icahn) August 22, 2013

Well, yes, we all know that. But nothing like a dose of HFT momentum ignition driven by a tweet to provide an upside bias just as the shocked and confused algos regroup.

It was a quiet overnight session, in which the Nikkei was catching up to USDJPY weakness from the past two days, while China dipped once more despite the NDRC's chief economist stating China may cut RRR or conduct more reverse repos in H2 to maintain stable credit as loan growth slows down (or in other words things go back to normal). In Europe ECB's Nowotny decided to undo some of Draghi's recent work when he said that "good economic news" removes the need for a rate cut which in turn pushed the EURUSD higher (and European exports lower), even as former Cyprus central bank Orphanides said the Euro crisis may flare up after the German elections. In the UK Q2 GDP came in slightly stronger than expected at 0.7% vs 0.6% Exp. letting the GBP outperform since a need for the BOE to ease, at least in the short run, is becoming less pertinent. In amusing news, Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations. As such GS, JPM, MS and WFC may be cut.

The only thing on the US docket is New Home Sales due out at 10 am, expected to post a slight decline from 497K to 487K. The Jackson Hole symposium continues.

Overnight news bulletin from Bloomberg:

• Treasuries headed for second consecutive weekly loss, with 10Y yields gaining 5.8bps to 2.883%; reached 2.934%, highest in more than two years.
• 5Y and 7Y notes bore brunt of selling, rising 12.1bps and 10.2bps, respectively, amid Fed tapering bets and before Treasury sells the debt next week
• ECB’s Ewald Nowotny said the recent “stream of good news” from the euro-area economy has removed any need to cut interest rates  to a fresh record low
• U.K. GDP rose 0.7% in 2Q, more than initial 0.6% estimate, more than initially estimated, helped by construction and manufacturing and a boost from trade
• Radiation spreading from Japan’s crippled Fukushima plant threatens to derail Abe’s efforts to revive nuclear power and deliver the lower energy prices needed to power his economic reforms
• Losses this month in fixed-income markets are making 2013 among the worst years on record for U.S. IG bonds, even exceeding 1994 when the Fed shocked investors by doubling benchmark interest rates in 12 months
• Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations; GS, JPM, MS and WFC may be cut; BAC, C uncertain
• Brazil stepped up efforts to arrest the world’s worst currency decline, announcing a $60b intervention program involving currency swaps and loans
• U.K. and U.S. regulators are preparing to impose fines as soon as mid-September on JPMorgan after an investigation into the bank’s “London Whale” trading losses last year, a person with direct knowledge of the matter said
• Sovereign yields mostly higher, EU peripheral spreads mostly tighter, Euro Stoxx Banks -0.3%. Nikkei rises 2.2% as JPY retreats below 99 level; Shanghai Composite falls. European stocks mised, U.S. equity index-futures fall. WTI crude, gold and copper gain

Market Recap

Stocks traded mixed in Europe, with the FTSE-100 index outperforming its peers following the release of better than expected 2nd Q2 GDP reading (Q/Q 0.7% vs Exp. 0.6%). At the same time, hawkish comments by ECB's Nowotny who said that said good economic news removes the need for a rate cut and that good news won't prompt the ECB to tighten ensured that Bunds failed to benefit from lower trading stocks, with the Euribor curve also bear steepening as a result and the EONIA 1y1y forward rising to its highest level since late June.

However even though GBP outperformed its major counterpart, with EUR/GBP below the 100DMA line, the steepening of the UK curve wasn't as aggressive as that observed by the German curve, as market participants continued to pay note to recent comments made by BoE’s Weale who did not rule out further QE.

As such, there is a growing expectation that next week’s speech by Carney will be used by the Governor to realign market expectations of future interest rate hikes with those as envisaged by the BoE. Going forward, market participants will get to digest the release of the latest CPI data from Canada and also New Home Sales report for the month of July out of the US. Keep in mind volumes have already been the lightest in bund futures so far this week (206k at 1037BST) and with UK markets closed on Monday for the August bank holiday the afternoon session in Europe may be uneventful barring any unexpected events.

Asian Headlines

PBOC may cut RRR or conduct reverse repurchases in H2 to maintain stable credit as loan growth may slow, according to NDRC's chief economist Fan Jianping. Elsewhere, China's H2 industrial output may grow about 9%, according to a joint report by China Development Bank and NDRC's State Information Centre.

EU & UK Headlines

ECB's Nowotny said good economic news removes the need for a rate cut and that good news won't prompt ECB to tighten. Nowotny added that he is cautiously optimistic about the Euro area outlook and that it is too soon whether to say Greece needs a new bailout. Nowotny further commented that ECB's steady hand approach has worked well and also signalled he opposes releasing ECB vote details.

German GDP SA (Q2 F) Q/Q 0.7% vs. Exp. 0.7% (Prev. 0.7%)
German GDP WDA (Q2 F) Y/Y 0.5% vs. Exp. 0.5% (Prev. 0.5%)
German GDP NSA (Q2 F) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.9%)

German finance minister Schaeuble said Greek unemployment appears to be past trough and that Greek economy may grow next year. Schaeuble added that the situation in Greece is improving and repeated that Greece will need a new aid program.

UK GDP (Q2 P) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.6%)
UK GDP (Q2 P) Y/Y 1.5% vs. Exp. 1.4% (Prev. 1.4%) - Biggest Y/Y rise since Q1 2011.

- Biggest expenditure contribution to Q/Q growth from net trade.
- Q2 industrial output +0.6% Q/Q, biggest rise since Q4 2010.

UK BBA Loans for House Purchase (Jul) M/M 37200 vs. Exp. 39400 (Prev. 37278, Rev. to 37337)
Barclays prelim month-end extensions Euro agg at +0.03yrs
Barclays prelim month-end extensions UK Gilts +0.07yrs

US Headlines

Fed watcher Hilsenrath wrote: "Fed Debates Whether Purchases or Promises Work Better". According to the report Federal Reserve officials gathering in Jackson Hole, Wyo., this week with academics, private bank economists and others will ponder a question that will influence Fed decisions in the coming months: Which of its novel monetary tools are doing the most for the economy? (WSJ)

PIMCO's Mather said the Treasury sell-off is overdone and that the curve is too steep. Mather further added that PIMCO is favouring yield-curve trades in US, Europe and Australia and sees USD strong in the shortterm, but weak in the long-term.

Equities

Stocks traded mixed in Europe, with the FTSE-100 index outperforming its peers following the release of better than expected 2nd Q2 GDP reading (Q/Q 0.7% vs Exp. 0.6%). However it was the health care and consumer goods sectors that underperformed, which when combined with the fact that credit spreads are tighter, indicates that the sentiment isn't as cautious as first seems.

Of note, following yesterday's technical glitch at the NASDAQ exchange, NASDAQ executives in internal discussions identified NYSE Arca connectivity as trigger of technology problems, according to a source.

Rating agency Moody's put six largest US banks on review. Said Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo may be cut. Added that Bank of America and Citigroup on review, direction uncertain and cites review to consider reduced government support.

FX

EUR/USD and GBP/USD traded higher in Europe this morning, supported by the release of better than expected UK GDP report, but also by market participants booking profits on long USD positions which saw the USD index move back below the 200DMA line.

Brazil, Indonesia launch measures to shore up their currencies. (FT-More)

Brazil and Indonesia have moved to stem the declines in their currencies and shore up confidence at the end of a torrid week for emerging markets where local borrowing costs hit a two-year high. The central bank of Latin America’s largest economy said late on Thursday that it would launch a currency intervention programme worth about USD 60bln to ensure liquidity and reduce volatility in the nation’s foreign exchange market.

Goldman Sachs cut its IDR 3-month estimate to 12000 from 10000 per USD, cut its MYR 3-month estimate to 3.40 from 3.20 per USD and also cut THB 3-month estimate to 33.00 from 31.30 per USD.

Commodities

American, Jordanian and and Israeli forces are moving towards Damascus, following the recent suspected chemical weapons attack in Syria.

The Israeli military said it bombed a Lebanese target in retaliation for Thursday's rocket attack. There were also comments from Palestinian group that confirmed its Lebanon base was attacked and stated that there was no damage or injuries.

Commerzbank predicts Brent will rise to USD 112 a barrel by year-end.

Consumption of necklaces, bracelets and rings will probably climb to 40mt this year, according to Iskandar Husin, secretary-general of the Indonesian Goldsmiths and Jewelers Association

* * *

DB's Jim Reid recaps the full events from the past 24 hours

A better risk tone has prevailed over the last 24 hours helped by the above-consensus European/Chinese PMIs and a stabilisation in US rates. With UST yields largely unchanged, credit markets had one of their most constructive days of the past month. Indeed, European credit indices tightened back to their pre-FOMC-minutes levels and US credit markets continued on with the rally after European markets had shut. European core bond yields rose which was partly attributed to the bumper PMIs which saw the euroarea composite PMI (51.7) beat expectations by 0.8pts and last month’s reading by 1.2pts. DB’s economists write that with French composite output down and Germany and the euro area up, the implication is for a fairly robust performance by the 'noncore' countries in August (the manufacturing PMIs for Spain and Italy are not released until Sept 2nd). This explained some of the outperformance in Spain’s IBEX (+1.98%) and Italy’s MIB (+2.56%) against the broader Stoxx600 (+0.98%).

Last month DB’s economists said that the pace of the PMI improvement could afford to slow and still be consistent with their H2 GDP growth forecasts. With yesterday’s PMIs that statement is even more relevant. In their view, the upside risks to near-term growth forecasts have increased. Indeed, the ECB’s Nowotny commented overnight in an interview at Jackson Hole that the good economic news out of the euro-area removes the need for a further rate cut. But at the same time, he ruled out an early tightening, saying “the most recent developments will have no immediate effects on the policy of the ECB” (Bloomberg).

Across the Atlantic, equity markets suffered a computer-related trading glitch for the second time in less than a week. The NASDAQ halted trading in equities shortly after noon (NY time) which affected volumes across a number of North American exchanges. Errors in the feed used to disseminate quotes and prices were blamed. The trading halt was lifted shortly before the end of the trading day but this was too late to prevent a large fall in volume market-wide.

Yesterday’s S&P500 volumes were the lowest for a Thursday in at least a year. When NASDAQ trading eventually resumed, there were some noticeable price moves in individual securities including in Apple which gained about 0.8% - but this was helped by another tweet from well-known investor Carl Icahn who said that the tech-giant’s CEO was supportive of a stock buyback. On the data front, there was some focus on weekly initial jobless claims data given that this week coincides with the survey period for August’s payrolls. For the week ended August 17th, jobless claims printed at 336k or 13k higher than last week’s upwardly revised 323k. DB’s economists note that the four-week average fell 2k to 331k which is the lowest since November 2007. There were no special factors cited by the Department of Labor. Our economists point out that historically when jobless claims have averaged below 350k, nonfarm payrolls have grown in excess of +200k. DB continue to expect +190k on the headline (+200k private) and a one-tenth decline in the unemployment rate to 7.3% for August employment (due on September 6th). Note that while there was little reaction from US rates markets to the data flow, the UST curve continues to steepen. The 2/10s curve is at its highest levels in two years and 2s/30s and 2s/5s remain at near two year highs.

This morning we’re seeing a continued unwind of some of the EM weakness experienced this week. High beta EM sovereigns such as Indonesia (-15bp) and Philippines (-8bp) are seeing a strong retracement in spreads. Cash bond markets are generally firmer across the board and S&P500 futures are up 0.2% at 1657. The Nikkei (+2.5%) is leading the gains in Asian equities helped by yesterday’s 1% gain USDJPY. Solid gains are also being recorded on the Hang Seng (+0.5%), KOSPI (+1.4%) and ASX200 (+1.1%). There are still pockets of weakness amongst EM currencies with the USDINR a touch firmer but IDR continuing its selloff against the dollar.

Coming back to the topic of rates, Freddie Mac said yesterday that the average rate for 30-year fixed rate mortgages jumped to a two year high of 4.58% last week, which is up 18bp on the previous week. The 15-year mortgage rate also increased to a two year high of 3.6%. According to Freddie Mac data, the 30- year rate is now more than 125bp higher than the bottom of 3.31% reached on November 21st 2012. The housing data has held up relatively firm amid this backdrop but this is something to keep an eye on over the next few months.

After the US market close, Moody’s placed the senior and subordinated debt ratings of the six largest US bank holding companies on review as it considers reducing its government (or systemic) support assumptions to reflect the impact of US bank resolution policies. Four banks - Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo - are on review for downgrade. Two banks, Bank of America and Citigroup, are on review direction uncertain. Moody’s current ratings on the banks are generally lower than that of S&P’s and a downgrade by Moody’s could mean that more banks fall into the Baa rating category (equivalent of BBB category at S&P).

Turning to the day ahead, we have a relatively quiet day ahead in terms of data flow with just July new home sales in the US, consumer confidence in the Euroarea and Q2 GDP data for Germany and the UK. The Jackson Hole economic summit could also generate some headlines.

Research In Motion BlackBerry may have to rename itself again. Or Thorstein Heins will have to do a Vogue cover spread. Or the company will have to take a page from the Amazon playbook and revel in its losses (with the help of a few DE Shaw algos of course). Or, worst case, Carl iCahn will have to tweet that his breakfast plans include checking his email on a BlackBerry. Because operationally the company is set to become the functional equivalent of JCP, especially following the latest news from the WSJ that sales of the company's Hail Mary product, the keyboard-equipped Q10, have been "dismal."

From the WSJ:

When BlackBerry Ltd. Chief Executive Thorsten Heins was asked why he decided to start selling the company's new keyboard-equipped smartphone months after a new touch-screen device, he said it was because BlackBerry "owned" the keyboard phone market and could afford to wait.

 

That decision appears to have backfired. Sales of the keyboard-equipped Q10, which BlackBerry hasn't discussed publicly, have been dismal, according to carrier executives and retailers in the U.S. and Canada.

The official narrative from retailers is even scarier:

 Chris Jourdan, who owns and operates 16 Wireless Zone stores in the Midwestern U.S. that sell Verizon Wireless products, said customers didn't show up for the Q10 as expected. His stores only ordered a few of the devices per location and "the handful that sold were returned."

 

"We saw virtually no demand for the Q10 and eventually returned most to our equipment vendor," he said.

 

In another indication the new BlackBerry devices aren't selling well, used phone dealers aren't reporting the flood of old BlackBerrys that typically comes when updated devices are released. Jeff Trachsel, chief marketing officer at NextWorth, which buys used electronics, said both the all touch-screen Z10 and Q10 launches were "nonevents" from a trade-in perspective.

 

"We thought there would be a pocket of die-hard BlackBerry enthusiasts waiting to upgrade, but it seems they have already moved on," he said.

And the conclusion:

"I think we'd all say that the Q10, the one we all thought was going to be the savior, just hit the ground and died," an executive at a Canadian carrier said. "It didn't drive the numbers that anybody expected."

Or as Simple Jack would say, "B-B-B-Blackberry B-B-B-Busted."

And to think that one short decade ago RIM BlackBerry was the end all, be all smartphone accesory. Just like Apple is now.

• Hedge Funds Cut Back on Fees (WSJ) as we predicted would happen, in May
• Syria's Assad denies chemical weapons use; U.S. presses case for strike (Reuters)
• Unemployment Falling for Wrong Reason Creates Fed Predicament (BBG)
• U.S. tapped into networks of Google, Petrobras, others (Reuters)
• Chinese Zombies Emerging After Years of Solar Subsidies (BBG)
• Monte Paschi doubles planned capital hike to 2.5 billion euros (Reuters)
• Loan Size to Be Cut for Fannie, Freddie (WSJ)
• Japan Growth Revision Opens Door to Sales Tax Rise (FT)
• Inside the End of the U.S. Bid to Punish Lehman Executives (NYT)
• Financial Crisis: Lessons of the Rescue, A Drama in Five Acts (WSJ)
• Time Warner Joins IBM in Health Shift for Retirees (WSJ)
• Mideast Derails Key Issues in Congress (WSJ)
• Americans use the Internet to abandon children adopted from overseas (Reuters)
• Instagram to start selling ads next year (WSJ)
• BoE's Fisher Says May Hold Off On More QE (Reuters)
• Investors Are Poised to Pay $6 Billion for Neiman (WSJ)
• Treasury Official Lael Brainard Considered for Fed (WSJ)

Overnight Media Digest

WSJ

* In a week poised to define his second term, President Barack Obama will mount an intensive campaign to promote a U.S. military strike on Syria as opposition rises in both Congress and across the country.

* Pressure from disappointed investors is forcing hedge funds to roll back their fees, putting the standard charge of 2 percent of assets under management and 20 percent of investment profits on the endangered list.

* The turnaround at real estate brokerage firm Realogy highlights how private equity firms can pull financial levers to keep troubled companies they own afloat and reap profits.

* A team of Ares Management and the Canada Pension Plan Investment Board are in the final stages of talks to buy the luxury retailer Neiman Marcus for around $6 billion.

* At Facebook's Instagram unit, Emily White is the point person charged with turning a billion-dollar acquisition that has never made a cent into a real business. Ad sales, she said, are expected to begin in the next year.

* Japan's economy grew at a much faster pace in the second quarter than initially estimated, data showed Monday, giving more ammunition to supporters of a planned sales tax hike.

* McLaren intends to open its first Chinese dealership, in Shanghai, on Monday. The UK-based supercar maker is seeking to cash in on a growing Chinese taste for ultraluxury goods.

* International Business Machines plans to move about 110,000 retirees off its company sponsored health plan and instead give them a payment to buy coverage on a health insurance exchange.

* A key U.S. committee approved the $4.7 billion takeover of Smithfield Foods by Shuanghui, clearing the biggest purchase of a U.S. company ever by a Chinese firm.

* Johnson & Johnson, which has been shedding slow-growing products and units, is canvassing companies that might be interested in buying its blood testing division, which could be worth around $5 billion.

FT

Chinese e-commerce company Alibaba is prepared to scrap plans for a $60 billion Hong Kong float and instead list in New York if its senior management cannot nominate a majority of board directors, according to people close to the company.

Dell Inc's billionaire Chief Executive Michael Dell is this week set to win shareholder backing for his drawn-out $24.8 billion buyout of the PC company that he founded, barring last-minute intervention from activist investor Carl Icahn.

The British Treasury is planning to request that the European Commission extend Lloyds Banking Group's November 2013 deadline to sell a package of 631 retail branches by up to two years. The request is expected to be submitted by the end of September, according to people close to the process.

Upscale U.S. retailer Neiman Marcus is likely to be sold - rather than listed - to a consortium of Ares Management LLC and the Canada Pension Plan Investment Board for over $6 billion, sources said.

British property website Zoopla has hired Credit Suisse to explore growth opportunities that will likely mean a London stock market listing.

NYT

* President Bashar al-Assad of Syria, who has denied that his government attacked civilians with chemical weapons on Aug. 21, reiterated that denial to the American people on Sunday morning via the television interviewer Charlie Rose.

* The handset market is so brutally competitive that Apple Inc, the most successful smartphone maker, is preparing to step up its game this week by offering two new iPhones instead of one. At an event on Tuesday at its Cupertino, California, headquarters, the company is set to unveil for customers worldwide a new iPhone with a faster processor, along with another model that will be sold at a lower cost.

* China's trade surplus rose in August to its highest level this year, while inflation remained under control, government data released on Sunday and Monday showed, in further signs that the Chinese economy and possibly the global economy are faring a little better as the summer ends.

* The owners of the Neiman Marcus chain are near a deal to sell the luxury retailer to a group led by Ares Management and a Canadian pension plan for about $6 billion, a person briefed on the matter said on Sunday.

* NYSE Euronext is expected to announce on Monday that it has made a minority investment in ACE, a three-year-old start-up that offers companies a centralized platform to privately sell stocks, bonds and other securities. Financial terms of the partnership were not available.

* People magazine is changing its subscription model, adding a tiered plan to what has long been considered the financial backbone of Time Inc's magazine empire. On Monday, the magazine is introducing four new subscription packages.

* Toyota Motor Corp is recalling about 780,000 vehicles for a second time after its first effort to prevent a handling problem did not work, according to a report posted Sunday on the website of the National Highway Traffic Safety Administration.

Canada

THE GLOBE AND MAIL

* U.S. President Barack Obama's top aide pressed on Sunday the case for "targeted, limited consequential action" to degrade the capabilities of Syrian President Bashar Assad to carry out chemical weapons attacks as the White House mounted a major push to win support from a divided Congress and skeptical American public for a military strike.

* An ally of Russian President Vladimir Putin won Moscow's mayoral election on Sunday, nearly complete results showed, but opposition leader Alexei Navalny's unexpectedly strong showing could alarm the Kremlin and fuel the country's flagging protest movement.

* Documents leaked by Edward Snowden indicate the National Security Agency spied on Brazil's state-run oil company, the private computer networks of Google Inc and a company that facilitates most of the world's international bank transfers, a Brazilian TV report says.

Reports in the business section:

* The Canadian Pension Plan Investment Board is in advanced talks with a U.S. private equity partner, Ares Management LLC, to acquire Neiman Marcus Inc for about $6 billion, American news outlets reported on Sunday.

* BCE Inc is heading to court in its battle against Ottawa's strategy for attracting new wireless players, arguing that Canada's Industry Minister James Moore has no right to impose greater obligations on the company to help smaller rivals.

* Bombardier Inc executives are looking to the sky as they await a picture-perfect blue ceiling and winds of less than 10 knots an hour to clear the way for the takeoff of the new C Series. Already nine months behind its original schedule, the first flight of the new commercial aircraft could occur any day now that the aircraft maker ran some high-speed taxi tests on a Mirabel runway on Friday. However, the extended weather forecast for the Montreal area, which calls for storms and rain as of Tuesday, makes the day tricky to predict.

NATIONAL POST

* Canada's Prime Minister Stephen Harper offered to participate in joint efforts with the United States to cut greenhouse gas emissions to win approval of the Keystone XL pipeline, according to a person familiar with the matter.

* Progressive Conservative Leader Tim Hudak says he has removed Peter Shurman from his position as finance critic. Hudak said on Sunday that he met with Shurman to discuss his accommodation expense claims. It was revealed last week that Shurman, a Toronto-area member, billed the maximum C$20,719 (about $20,000) last year after moving to Niagara-on-the-Lake.

* Merit pay and national licensing standards for public school teachers would curb the influence of "entrenched and powerful interest groups" and promote better teaching, says a new study on how to make Canadian teachers more effective.

FINANCIAL POST

* The latest statistics for the Canadian exchange-traded-fund industry depict a more challenging backdrop than investors have become used to. August saw more than a quarter of all ETFs in Canada in redemption mode, according to ETFinsight's data.

China

PEOPLE'S DAILY

-- Vice Premier Zhang Gaoli told senior officials at a meeting on Sunday that China will stick to a policy to improve its economic structure and upgrade its development pattern so as to ensure sustained growth despite a slowdown in the economy.

CHINA DAILY

-- China exports expanded faster than expected in August, according to figures posted by the government on Sunday, with experts predicting the world's second-largest economy will recover further in coming months from its recent slowdown.

CHINA SECURITIES JOURNAL

-- The Shanghai Commodity Exchange has applied to regulators to launch China's first commodity index futures on non-ferrous metals.

-- A survey by China's government-backed securities insurance firm shows investor confidence in the domestic stock market improved in August, buoyed by signs of improvement in the economy.

SHANGHAI SECURITIES NEWS

-- China's government securities clearing house is working on a project that may allow investors trading on the Shanghai and Shenzhen stock exchanges to use one account for the first time next year.

-- In a sign that China's housing market has recovered to some extent this year, major developer Poly Real Estate said January-August sales rose 16.48 percent to 79 billion yuan ($12.9 billion).

SECURITIES TIMES

-- Ping An Insurance said it would buy a fresh stake in its subsidiary Ping An Bank worth a maximum 14.8 billion yuan to boost the lender's capital adequacy ratio.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Baker Hughes (BHI) upgraded to Outperform from Market Perform at Wells Fargo
Brocade (BRCD) upgraded to Outperform from Sector Perform at RBC Capital
Cimarex Energy (XEC) upgraded to Overweight from Equal Weight at Morgan Stanley
EOG Resources (EOG) upgraded to Overweight from Equal Weight at Morgan Stanley
Eaton (ETN) upgraded to Overweight from Equal Weight at Morgan Stanley
Estee Lauder (EL) upgraded to Buy from Neutral at Citigroup
FIS (FIS) upgraded to Buy from Neutral at SunTrust
Inter Parfums (IPAR) upgraded to Buy from Neutral at B. Riley
Nanometrics (NANO) upgraded to Overweight from Neutral at Piper Jaffray
NetApp (NTAP) upgraded to Buy from Neutral at UBS
Plum Creek Timber (PCL) upgraded to Outperform from Market Perform at BMO Capital
Quiksilver (ZQK) upgraded to Outperform from Neutral at Credit Suisse
Salix (SLXP) upgraded to Outperform from Market Perform at Leerink

Downgrades

Apache (APA) downgraded to Buy from Strong Buy at ISI Group
Community Health (CYH) downgraded to Neutral from Buy at Citigroup
Fifth Third Bancorp (FITB) downgraded to Market Perform from Outperform at Raymond James
Halliburton (HAL) downgraded to Market Perform from Outperform at Wells Fargo
Hercules Technology (HTGC) downgraded to Market Perform at Keefe Bruyette
HollyFrontier (HFC) downgraded to Equal Weight from Overweight at Morgan Stanley
IAC (IACI) downgraded to Hold from Buy at Canaccord
Multimedia Games (MGAM) downgraded to Neutral from Buy at Janney Capital
Rockwood (ROC) downgraded to Hold from Buy at Deutsche Bank

Initiations

Abercrombie & Fitch (ANF) initiated with a Buy at Nomura
Aeropostale (ARO) initiated with a Neutral at Nomura
American Eagle (AEO) initiated with a Neutral at Nomura
Ann Inc. (ANN) initiated with a Neutral at Nomura
Chico's FAS (CHS) initiated with a Buy at Nomura
DineEquity (DIN) initiated with a Hold at KeyBanc
Domino's Pizza (DPZ) initiated with a Buy at KeyBanc
Express (EXPR) initiated with a Buy at Nomura
Fossil (FOSL) initiated with a Neutral at Nomura
Francesca's (FRAN) initiated with a Buy at Nomura
Gap (GPS) initiated with a Neutral at Nomura
L Brands (LTD) initiated with a Neutral at Nomura
Layne Christensen (LAYN) initiated with a Neutral at DA Davidson
Natural Grocers (NGVC) initiated with an Outperform at Wells Fargo
Oshkosh (OSK) initiated with a Sector Perform at RBC Capital
Precision Drilling (PDS) initiated with an Equal Weight at Barclays
Sally Beauty (SBH) initiated with a Neutral at Citigroup
Signet Jewelers (SIG) initiated with a Buy at Nomura
Sprint (S) re-initiated with an Equal Weight at Evercore
The Buckle (BKE) initiated with a Neutral at Nomura
Third Point Reinsurance (TPRE) initiated with a Buy at BofA/Merrill
Third Point Reinsurance (TPRE) initiated with a Neutral at Citigroup
Third Point Reinsurance (TPRE) initiated with a Neutral at JPMorgan
Ulta Salon (ULTA) initiated with a Buy at Citigroup
Urban Outfitters (URBN) initiated with a Neutral at Nomura
lululemon (LULU) initiated with a Buy at Citigroup

HOT STOCKS

GlaxoSmithKline (GSK) sold nutritional drinks brands to Suntory for $2.1B
Apple (AAPL) said to be close to iPhone deal with China Mobile (CHL), Bloomberg reports
Fitch affirmed McDonald's (MCD) IDRs at 'A/F1', outlook Stable
PNC Financial (PNC) to wind down Market Street Funding
First Solar (FSLR) announced JV with Belectric Holding

EARNINGS

Companies that missed consensus earnings expectations include:
SHFL entertainment (SHFL)

NEWSPAPERS/WEBSITES

• Pressure from disappointed investors is forcing hedge funds to roll back their fees, putting the standard charge of 2% of assets under management and 20% of investment profits on the endangered list, the Wall Street Journal reports
• Time Warner (TWX) plans to move its U.S. retirees from company-administered health plans to private exchanges. The company will allocate funds in special accounts that retirees can use to go shop for coverage, sources say, the Wall Street Journal reports
• A potential landmark case for U.S. regulation of Internet traffic (VZ) goes before a panel of federal judges today, testing whether the Federal Telecommunications Commission has authority to enforce so-called net neutrality rules, Reuters reports
• The U.S. government tapped into computer networks of companies including Google (GOOG) and Brazilian state-run oil firm Petroleo Brasileiro (PBR), according to leaked U.S. documents aired by Globo, Brazil's biggest TV network, Reuters reports
• Las Vegas Sands (LVS) and MGM Resorts International (MGM) are scouting sites for casinos in Japan as Tokyo’s selection to host the 2020 Olympics boosts confidence a law legalizing gambling resorts in the capital will pass, Bloomberg reports
• PetroChina Co. (PTR), mired in a government graft probe, said a media report that more executives were being investigated by the authorities is untrue. PetroChina had earlier suspended its shares from trading in Hong Kong and Shanghai pending the statement, Bloomberg reports

BARRON’S

Lenovo LNVGY) looks to conquer smartphone, tablet market (SSNLF, AAPL)
Microsoft (MSFT) could be attractive if it aggressively returns cash to its shareholders
Caterpillar (CAT), Joy Global (JOY), Textron (TXT), GE (GE) could rise 30%
Bob Evans (BOBE) could rise 30%
EMC (EMC), NetApp (NTAP) could be vulnerable to new companies (DELL)

SYNDICATE

AOL (AOL) files to sell 2.43M shares of common stock for holders
Chesapeake Lodging (CHSP) files prospectus to offer up to $100M in common shares
Sagent Pharmaceuticals (SGNT) files to sell 4.4M shares of common stock
SolarCity (SCTY) files to sell 3.67M shares of common stock for selling shareholder

The 77-year old billionaire twitterer extraordinaire, Carl Icahn, shows everyone just how it's done, making a levered profit in the process, but not before he lets a few sharp barbs out to tell everyone just how he feels. 

And so Jefferies is allowed to redirect its "highly confident letter" forward guidance elsewhere: like arranging the staple financing to LBO the Fed.

From Carl Icahn's just filed letter to Dell Shareholders:

New York, New York, September 9, 2013 – Today Carl Icahn released the following open letter to Dell Inc. stockholders.

Dear Fellow Dell Inc. Stockholders:

I continue to believe that the price being paid by Michael Dell/Silver Lake to purchase our company greatly undervalues it, among other things, because:

1. Dell is paying a price approximately 70% below its ten-year high of $42.38; and
2. The bid freezes stockholders out of any possibility of realizing Dell’s great potential.

Although the board accepted Michael Dell/Silver Lake’s offer in February, it promised stockholders that the Company would hold a meeting at which stockholders could make the final decision as whether or not to accept the transaction.  The board recommended that stockholders vote in favor of the proposed transaction because it was Michael Dell/Silver Lake’s “best and final offer”.  Icahn and Southeastern argued that stockholders should not give up the huge potential of Dell and therefore should reject the proposed transaction.  We won, or at least thought we won, but when the board realized that they lost the vote, they simply ignored the outcome.  Even in a dictatorship when the ruling party loses an election, and then ignores its outcome, it attempts to provide a plausible reason to justify their actions. Andrew Bary at Barron’s wisely observed, “In an action worthy of Vladimir Putin, Dell postponed a vote scheduled for last Thursday on Michael Dell’s proposed buyout of the company when it became apparent that there was insufficient shareholder support for the deal.”  But the Dell board felt they needed no excuse when they changed the voting standard and changed the record date of those eligible to vote, which allowed arbitrageurs to vote a much greater percentage of the stock when the polls reopen and scheduled the annual meeting for October. The board simply relied on the usual “business judgment” catchall and Delaware law to uphold their actions.  We jokingly ask, “What’s the difference between Dell and a dictatorship?” The answer: Most functioning dictatorships only need to postpone the vote once to win.

As a result of 1) the change in the record date allowing new stockholders to vote on the proposed Michael Dell/Silver Lake transaction on September 12th, 2) Chancellor Strine’s ruling that a gap period between the September 12th meeting and the annual meeting was legal under Delaware law and 3) the raise in the bid by Michael Dell/Silver Lake, we have determined that it would be almost impossible to win the battle on September 12th.. We have therefore come to the conclusion that we will not pursue additional efforts to defeat the   Michael Dell/Silver Lake proposal, although we still oppose it and will move to seek appraisal rights.

I realize that some stockholders will be disappointed that we do not fight on.  However, over the last decade, mainly through “activism” we have enhanced stockholder value in many companies by billions of dollars.  We did not accomplish this by waging battles that we thought we would lose.  Michael Dell/Silver Lake waged a hard fought battle and according to Chancellor Strine, the actions by Dell were within the Delaware law.  We therefore congratulate Michael Dell and I intend to call him to wish him good luck (he may need it).

While we of course are saddened at our losing the battle to control Dell, it certainly makes the loss a lot more tolerable in that as a result of our involvement, Michael Dell/Silver Lake increased what they said was their “best and final offer”.  As a result of this increase all stockholders are to receive many hundreds of millions of dollars more than the board originally accepted. We will never know how much more stockholders might have received if the board had allowed the annual meeting to proceed at the same time as the rescheduled special meeting which we believe would have put pressure on Michael Dell/Silver Lake to increase their bid.

One of the great strengths of our country is that we abide by the rule of law.  However, state laws dealing with corporate governance often favor incumbent corporate boards and management and are weak in many areas.  While we must abide by these laws, we believe that they can and must be changed.  Among many other things, boards should not be able to treat elections as totalitarian dictatorships do; where if they lose, they simply ignore the results.

The Dell board, like so many boards in this country, reminds me of Clark Gable’s last words in “Gone with the Wind,” they simply “don’t give a damn.” If you are incensed by the actions of the Dell Board as much as I am, I hope you will choose to follow me on Twitter where from time to time I give my investment insights.  I also intend to point out what I consider to be unconscionable actions by boards and discuss what remedies shareholders may take to change the situation.

I wish to take this opportunity to thank all Dell shareholders who supported Southeastern and Icahn.

Very truly yours,

Carl Icahn

While Carl Icahn admits 'modest' defeat on the Dell deal, he remains neck deep in Herbalife, and as we illustrated back in February, and warned earlier in January, it seems someone is betting right alongside him on a massive short-squeeze - a la Volkswagen. It would appear, someone decided that today was the day to buy 1000 lots (100,000 shares) of Jan 2014 $105 calls (implying an expectation of a 65% surge in price from here) and funded that by selling 1000 lots of the Jan 2014 $95 calls. Whether this is a hedge for Ackman (fearing the worst) or someone betting on an 'event' across the one-year anniversary of Ackman's big bet is unclear. One thing is for sure, if this pays off, we will see more tweets from the man himself...

1000x1000 in the 95/105 Jan 2014 Calls??!!

and judging by the post-trade moves in implied vol, we suspect it was a more aggressive long than a hedged short...

So it appears that this is a leveraged bet that HLF's stock price will reach above $105 by the end of Jan 2014...

Charts: Bloomberg