US EARLY MORNING:

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  OVERNIGHT: US stocks were mixed on Friday, with SPX just above unchanged in choppy (albeit tight) trading conditions, and the S&P posted its worst week since December, as markets hawkishly repriced Fed views (see here). APAC stocks began the week in a mostly subdued fashion amid balloon-related geopolitical tensions, and as markets brace for tomorrow's US CPI report (see here). European stocks started with modest upside, with some ECB speak eyed (see here)


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  US PRE-MARKETS: US equity futures start the week with modest losses as traders brace for this week’s big risk events, that include US CPI, retail sales, as well as other potentially global-relevant event sin G10 (see section below). Treasuries are slightly-off, with the short-end underperforming (yields up around 2bps); the Dollar Index is a little better than flat. 


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  US-CHINA: US-China geopolitical tensions are lingering after the US military downed a fourth flying object after it flew in proximity to sensitive military sites; China responded by claiming that since last year, US high altitude balloons had flown over Chinese airspace on 10 occasions without permission. For now, traders are not treating this as a significant step-up in geopolitical tensions, but are keeping it on the radar, particularly ahead of China's senior foreign diplomat Wang Yi's visit to France, Italy, Russia and Hungary later this month; Wang Yi will also attend the Munich Security Conference later this week.


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  ACTIVE STRATEGIES: Goldman Sachs has told its clients that active strategies are becoming more attractive with the return of a micro-driven market and a flat outlook for beta. "Contrary to popular belief, resilient US macroeconomic data and abating recession risk has been accompanied by an S&P 500 index driven more by company-specific factors and less by macro variables," the bank writes, and "as the equity market has become less macro-driven, return dispersion has increased." The bank says that all else equal, return dispersion is lifted by high single-stock volatility and low stock correlation. "Our forecast for a flat S&P 500 index return in 2023 means beta is unlikely to be a tailwind for performance, underscoring the importance of alpha and active management," adding that "best stock-picking opportunities are in Consumer Discretionary and Communication Services." GS has outlined some names in the S&P 500 which it says are most likely to generate alpha: Within IT, GS notes ENPH, FSLR, SEDG, DXC; in Health Care, GS likes MRNA, ALGN, ILMN, DXCM, CNC, MOH; in Consumer Discretionary, the bank likes BBWI, ETSY, WYNN, KMX, LVS, CZR, ULTA; in Financials, it likes LNC; in Industrials it likes GNRC and UAL.

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


• 
  DAY AHEAD: It is a quiet start to a busy week. There is nothing by way of scheduled economic data releases in Europe or North American of any significance. On the speakers front, President Lagarde and ECB's Panetta (Dovish) will be at a Eurogroup meeting, although not expected to make any new policy comments, and there will be no text release. Meanwhile, Fed Governor Bowman will deliver remarks from a banking supervision event; she could offer some insight on weekend reports that said the Biden administration had discussed the possibility of stepping up oversight of financial firms operating outside the banking system, a sign they could move to ease or repeal Trump-era restrictions on regulating nonbank firms such as hedge funds or asset managers.


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  WEEK AHEAD: Traders will look to this week's key events, which include: nominations for the new BoJ Governor and his deputies (Tue), US CPI (Tue) and retail sales (Wed) data, lots of activity data out of the UK, while the Aussies will release jobs data (Thu). Our week ahead briefing can be accessed here.

STOCK SPECIFICS:

TECH:

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  Microsoft Corporation (MSFT) - Microsoft is preparing to demo how its new ChatGPT-like AI will transform its Office productivity apps in the coming weeks, The Verge reports. The software giant is tentatively planning an announcement in March, highlighting how quickly Microsoft wants to reinvent search and its productivity apps through its OpenAI investments.


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  Alphabet Inc. (GOOG) - Google employees criticize CEO Sundar Pichai for the "rushed, botched" and "comically short sighted" announcement of GPT competitor Bard, CNBC reports. Alphabet shares dropped more than 9% last week amid Google's attempt to compete with Microsoft's ChatGPT integration. Separately, the boss of Google's search engine wrote an op-ed in Germany's Welt am Sonntag newspaper warning on the pitfalls of AI, writing "this kind of artificial intelligence we're talking about right now can sometimes lead to something we call hallucination."


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  VMWare, Inc. (VMW), Broadcom Inc. (AVGO) - VMWare slipped in Friday trade; some suggest it was on a report in Capitol Forum that said the FTC was talking to industry players seeking input on the proposed Broadcom acquisition.


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  Toast, Inc. (TOST) - Positive mention in Barron's; says te stock is a buy since it is more than just a restaurant payment service.


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  Amkor Technology, Inc. (AMKR) - US chip packaging firm Amkor has closed its Shanghai plant for a week amid global market downturn, SCMP reports. The Waigaoqiao site in Shanghai's Free Trade Zone employs 5,300 people.

COMMUNICATIONS:

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  Meta Platforms, Inc. (META) - Meta has delayed finalising multiple teams’ budgets while it prepares a fresh round of job cuts, FT reports. Employees have said there had been a lack of clarity about budgets or future headcount in recent weeks, and staff have complained that “zero work” is getting done. Separately, ByteDance's TikTok is starting to snare market share in the CR headset space that Meta identified as critical to its future, WSJ reports; ByteDance two years ago bought Chinese startup Pico that makes VR headsets.


• 
  Electronic Arts Inc. (EA) - The Premier League is closing in on a commercial deal with Electronic Arts that would be worth close to GBP 500mln, Sky News reports. The 20 Premier League clubs were briefed at a meeting on Friday that a new six-year partnership with EA Sports worth about was close to being finalised.


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  Spotify Technology S.A. (SPOT) - Activist investor ValueAct Capital Management has built a position in Spotify, in a move that supports the music-streaming company’s strategy to tighten its spending and become more efficient, Bloomberg reports.


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  Sinclair Broadcast Group, Inc. (SBGI) - Sinclair-owned collection of 19 regional sports networks, Diamond Sports Group, is planning to file for bankruptcy next week, according to Sportico. Report adds that the group currently controls the local broadcast rights to more than 40 teams in the NBA, NHL and MLB, and its bankruptcy would be a significant blow to the cable network model that has lucratively buoyed US sports for the past 50 years. Sinclair bought the RSNs in a debt-heavy USD 9.6bln deal back in 2019, and since then, it has struggled.


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  Walt Disney Company (DIS) - Disney's chief technology officer of its streaming services, Jeremy Doig, has left the company, Bloomberg reports, the latest high-profile departure as CEO Bob Iger restructures the world’s largest entertainment company. Aaron LaBerge, who has worked at Disney for the past decade, will now oversee technology and product for Disney’s media businesses.


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  Telefonica S.A. (TEF), Liberty Global plc (LBTYA) - Telefonica and Liberty Global reportedly seek to sell 25% of Cornerstone unit, could fetch EUR 3bln+.


• 
  Telecom Italia S.p.A. (TIIAY) - Italy could buy a 20% stake in Telecom Italia's network unit for EUR 2bln to keep oversight.


• 
  Orange S.A (ORAN) - EU antitrust regulators set to approve Orange's Belgian deal by end-Feb, sources said.

CONSUMER DISCRETIONARY:

• 
  Amazon.com, Inc. (AMZN) - Amazon laid off more than 300 employees last month at its Zappos unit, or about 20% of the Las Vegas-based company’s workforce, sources told the WSJ. The Zappos cuts came as part of broader layoffs at Amazon that are expected to eliminate more than 18,000 employees.


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  EVs - Electric Vehicles prices could match those for gasoline cars this year, NYT reports, citing competition, government incentives and falling raw material prices, which are making battery-powered cars more affordable sooner than expected.


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  Tesla Inc. (TSLA) - The DoT is this week expected to finalise a requirement that will pressure Tesla to expand beyond its proprietary charging equipment in the US and add the charger used by its competitors, otherwise it will be left out of the USD 7.5bln in subsidies flowing out of Washington, Reuters reports.


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  Ford Motor Company (F) - Ford is set to announce plans to build a USD 3.5bln lithium iron phosphate battery plant in Michigan, Reuters reports. The automaker is expected to own and operate the plant with Chinese battery company China's CATL as a technology partner to help develop the batteries, sources said.


• 
  Renault S.A. (RNLSY), Nissan Motor Co (NSANY) - The two will invest USD 600mln to produce six new models in India, including two EVs.


• 
  Bed Bath & Beyond Inc. (BBBY) - Bed Bath & Beyond's Canadian operations are insolvent and going out of business, according to a court filing on Friday, two days after the retailer quickly raised cash to stave off a US bankruptcy, Reuters reports. The Canadian division operates 54 BBBY stores and 11 buybuy BABY stores.

CONSUMER STAPLES:

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  Walmart Inc. (WMT) - Walmart is warning major packaged goods makers that it can no longer stomach their price hikes, pitching its own private-label products to shoppers as less-expensive alternatives to suppliers' name-brand goods, Reuters reports. WMT will report earnings on February 21st.

ENERGY:

• 
  Energy M&A - US oil producers are hunting for deals as concerns grow that the shale patch’s best drilling sites are becoming more scarce, priming the sector for a wave of consolidation, FT reports; bankers and lawyers have reported a sharp uptick in activity in recent weeks, as buyers and sellers across the sector mobilise teams for dealmaking after a lengthy dry spell — especially in Permian Basin of Texas and New Mexico.


• 
  Phillips 66 (PSX) - Following a flare turnaround, the Borger refinery in Texas (150k BPD) has reported a return to service of its Cat Flare.

INDUSTRIALS:

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  JetBlue Airways Corporation (JBLU), Spirit Airlines, Inc. (SAVE) - DoJ is likely to sue to block a pending USD 3.8bln merger between JetBlue and Spirit airlines, POLITICO reports. It’s the latest anti-monopoly move by the Biden administration, which has also shown increasing interest in policing air travel.


• 
  Hertz Global Holdings, Inc. (HTZ) - Positive mention in this week's Barron's; said the stock was a buy given that it was cheap, well-run, and renting Tesla vehicles.


• 
  Airbus (EADSY) - The plane maker has reportedly signed deal with Air India for roughly 250 planes, Reuters reports.

FINANCIALS:

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  Goldman Sachs Group, Inc. (GS) - CEO reportedly told executives that he had erred by not cutting jobs earlier in 2022, FT reports citing sources. Solomon said he took responsibility for being slow to reduce headcount and pare back investment in new projects when it became apparent a significant business slowdown would happen.


• 
  PayPal Holdings, Inc. (PYPL) - PayPal is pausing work on its stablecoin as regulators increase scrutiny of cryptocurrencies and a key partner in the project Paxos faces a probe by the New York State Department of Financial Services, Bloomberg reports.


• 
  Fidelity National Information Services, Inc. (FIS) - Fidelity is preparing to break up, undoing a USD 43bln acquisition it completed four years ago, Reuters reports. FIS plans to pursue a tax-free spin-off of its merchant business, spin-off will take many months to be completed, and FIS will also entertain any acquisition offers for the unit during this period.


• 
  Deutsche Bank (DB) - Staff reportedly breached EU rules on mis-selling FX derivatives in Spain, FT claims.


• 
  Non-Bank Financials - The Biden administration has discussed the possibility of stepping up oversight of financial firms operating outside the banking system, a sign they could move to ease or repeal Trump-era restrictions on regulating nonbank firms such as hedge funds or asset managers, WSJ reports.


• 
  Pershing Square Holdings, Ltd. (PSH LN) - Pershing Square Holdings could leave London for New York, The Times reports, citing analysts who attended a private meeting this week with its manager Bill Ackman. Ackman took questions from investors and analysts about how he should close the 33% discount at which its shares trade relative to net assets.

HEALTH CARE:

• 
  Sanofi (SNY) - Global Head of R&D to leave the company. Separately, Sanofi will this year launch two first/best-in-class medicines to address major needs in haemophilia and respiratory syncytia virus, it said.

13 Feb 2023 - 09:31- Research Sheet- Source: Newsquawk