US EARLY MORNING: Equity futures are a little better than flat; quiet trading conditions being seen ahead of this week's Jackson Hole symposium

US index futures are trading with modest gains. Weekend newsflow was thin. The PBoC disappointed overnight with a smaller-than-expected rate cut (see below), but surprisingly left its 5yr rate unchanged. German PPI data failed to garner any meaningful reaction (see below). There is a feeling that traders are awaiting this week's key risk events, with Fed Chair Powell due to deliver remarks from Jackson Hole on Friday, where traders will be looking for a steer on near-term policy changes. The data slate is very quiet on Monday, with little by way of scheduled events. Treasury yields are wider by 2-4bps, with the long-end underperforming. The Dollar Index is slightly below neutral. Crude futures are trading firmly, however; Unions at Woodside Energy's offshore gas platforms plan to strike by September 2nd over pay and conditions if their demands are not met by Wednesday, and that could disrupt LNG shipments from Australia's major exporter, reports note. 

TODAY'S AGENDA:

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  DAY AHEAD: The schedule for the Day Ahead is thin (our Day Ahead calendar is here, and a pdf version can be accessed here), allowing traders to focus on other risk events this week (see below). Afterhours, earnings are due from Zoom Video Communications (ZM) and Nordson Corp (NDSN) (expectations are here). This week, we will get numbers from LOW and MDT on Tuesday, ADI and NVDA on Wednesday, and INTU and WDAY on Thursday (weekly earnings expectations are here). The main event of the week is the Kansas City Fed's economic symposium at Jackson Hole, where Fed Chair Powell will deliver remarks on Friday (we have a primer in our week ahead here).


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  REVIEW - PBOC RATE DECISION: The PBoC lowered its 1yr Loan Prime Rate by 10bps to 3.45%, disappointing expectations of a cut to 3.40% (given the recent lowering of the MLF rate by a 15bps magnitude); the 5yr rate was left unchanged at 4.20% against expectations of a cut to 4.05%. "The underwhelming LPR announcement strengthens our view that the PBoC is unlikely to embrace the much larger rates cuts that would be required to revive credit demand," Capital Economics said, adding that now, "hopes for a stimulus-led turnaround in economic activity largely depend on the prospect of greater fiscal support."


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  REVIEW - GERMAN PPI: German producer prices fell by a larger-than-expected -1.1% in July (-0.2%, prev. -0.3%), leaving the annual rate at -6.0% Y/Y (exp. -5.1%, prev. +0.1%). Bunds seem to have ignored the release, retreated further from Friday’s highs despite the softer than forecast PPI, with traders said to be awaiting the Bundesbank monthly report for potential impetus on an otherwise blank slate ahead.

EQUITY NEWS:

ENERGY:

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  Australia LNG, Woodside Energy (WDS) - Unions at Woodside Energy's offshore gas platforms plan to strike by September 2nd over pay and conditions, Reuters reports. This could disrupt LNG shipments from Australia's major exporter. The Offshore Alliance gave notice for the strike if their demands aren't met by Wednesday.


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  US Shale Rigs - The latest sign of the slowdown in the US shale patch came on Friday as Baker hughes data showed oil drilling has collapsed to the lowest level in more than a year, with the number of oil rigs operating in the US falling by 5 in week to 520, the lowest since March 2022, Bloomberg reports. The article adds that while shale producers say they need fewer rigs because they’re becoming more efficient, analysts have questioned whether some companies are running out of drilling locations.


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  US Oil Stocks, Chevron (CVX), Matador Resources (MTDR), Permian Resources (PR), Pioneer (PXD) - Positive mention in Barron's, which said that oil stocks were back. The article notes that energy stocks because they have been performing well recently while technology stocks have slowed. Rising oil and natural gas prices due to supply cuts and increased demand have contributed to this growth. Oil exploration and production companies, like Pioneer Natural Resources, are seen as attractive due to cost savings and higher returns for investors.

CONSUMER:

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  Amazon (AMZN), FedEx (FDX), United Parcel Service (UPS) - Amazon is expanding its in-house delivery service, which competes with FedEx and UPS, according to Business Insider. The service allows sellers to ship products sold on Amazon's marketplace and other sites. The move further solidifies Amazon's presence in last-mile delivery, the article added.


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  Alibaba (BABA) - Alibaba's e-commerce units Taobao and Tmall in China are hiring over 2,000 entry-level employees, a sign of Big Tech's growth after downsising, China's SCMP newspaper said. BABA seeks fresh graduates for roles in areas like engineering and data in cities including Hangzhou, Beijing, and Shanghai, and plans to hire 15,000 employees this year after reducing its workforce previously.


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  General Motors (GM) - GM's Cruise self-driving unit will reduce its robotaxis in San Francisco by 50% as authorities investigate recent crashes, ABC reports. Follows a driverless Cruise vehicle which collided with an emergency vehicle. This decision comes after California's approval for Cruise and Waymo to operate self-driving taxis 24/7 in the city.


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  Kraft Heinz (KHC) - The packaged food company sees a USD 25bln opportunity in revamping Lunchables for school cafeterias, tapping a new market and drawing pushback, WSJ reports.


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  Kroger (KR) - Kroger has quietly become the biggest sushi seller in the US, Business Insider reported. America's largest grocery retailer sells more than 40mln pieces of sushi a year, and wants to become a destination for more than just groceries. Analysts said it underscored how supermarkets are increasingly selling more prepared foods.

FINANCIALS/REAL ESTATE:

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  Citigroup (C) - CEO Jane Fraser is reportedly considering a major restructuring plan to break up the bank's largest division, the Institutional Clients Group (ICG), into its primary business segments: investment and corporate banking, global markets, and transaction services, according to the FT. This potential change would give Fraser greater control and reshape reporting lines within the bank. The move comes after the departure of ICG's leader, Paco Ybarra. Citi currently operates with two divisions, but this move would result in five divisions directly reporting to Fraser.


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  Goldman Sachs (GS) - CEO David Solomon is facing internal challenges and negative media coverage, including questions about his leadership style. But despite the criticism, he retains support from the bank's directors and major shareholders, FT reports. Recent events like disappointing bonuses and executive departures will be discussed at an upcoming board meeting.


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  Capital One Financial (COF) - Capital One has sold an office loan portfolio worth almost USD 900mln, reflecting challenges in the CRE sector due to remote work and empty office buildings during the pandemic, Reuters reports. A spokesperson didn't disclose details about the deal or the buyer.


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  Mastercard (MA), Visa (V) - Both are mentioned positively in Barron's; the newspaper said Visa and Mastercard's dominance in electronic payments is not as threatened as it might seem, noting that their high profits come from processing fees, and despite potential challenges, the widespread use of credit cards and the limited merchant options for payment will likely maintain their strong position.


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  PayPal (PYPL) - WSJ notes how sentiment has been weakening around the stock.


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  Crypto - SEC is likely to approve the creation of ETFs based on Ether futures contracts, Bloomberg reports. The move would be a significant success for companies like Volatility Shares, Bitwise, Roundhill, and ProShares, which have applied to launch these ETFs. While the SEC hasn't specified which funds will be approved, sources cited by Bloomberg suggested that some could receive approval by October.


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  Marsh & McLennan (MMC) - The US insurer is to acquire Australia's Honan Insurance for about AUD 700mln, AFR reports. This involves purchasing TA Associates' 80% stake in Honan. The deal, to be finalised in 2023, will expand Marsh's presence in Australia, New Zealand, and Asia.


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  Direct Line (DIISY), Aviva (AVVIY) - UK insurer Direct Line is considering hiring Adam Winslow, a senior executive from rival Aviva, as its new CEO, Sky reports. The talks are ongoing, and it's uncertain if Winslow will take on the role.


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  Re/Max Holdings (RMAX) - Real estate franchise provider Re/Max is cutting 7% of its workforce as part of a restructuring effort, MarketWatch reports. The company expects a one-time termination benefits cost of around USD 2.8-3.3mln, most recognised in Q3. This follows a previous reduction of about 17% of its workforce in 2022.

TECH:

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  SoftBank (SFTBY) - SoftBank's Arm Ltd. chip designer saw its revenue drop about 1% last year to USD 2.68bln, according to a draft filing seen by Bloomberg. Despite this, its parent company, SoftBank, plans to value Arm at up to USD 70bln in the upcoming IPO. Elsewhere, Reuters reports that SoftBank has acquired the 25% stake in Arm that it does not directly own from its Vision Fund unit, which values the chip designer at USD 64bln; details of the transaction will be unveiled on Monday when Arm makes public the filing for its IPO.


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  Palo Alto Networks (PANW) - Q4 adj. EPS 1.44 (exp. 1.28), Q4 revenue USD 1.95bln (exp. 1.96bln), Q4 Remaining Performance Obligations +30% to USD 10.6Bbln. Sees Q1 revenue between USD 1.82-1.85bln (exp. 1.92bln), and sees Q1 billings between USD 2.05-2.08bln (exp. 2.07bln). For the FY24, sees revenue between USD 8.15-8.20bln (exp. 8.38bln), F24 billings seen between USD 10.9-11.0bln (exp. 10.7bln), and FY24 EPS seen between 5.27-5.40 (exp. 4.99).


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  Chip Names, Nvidia (NVDA), Advanced Micro Devices (AMD), Intel (INTC) - UK is in talks with Nvidia, Advanced Micro Devices and Intel about procuring equipment for AI research, and has allocated GBP 100mln to the project, The Telegraph reports.

COMMUNICATIONS:

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  Disney (DIS), Verizon (VZ) - Disney CEO Bob Iger is seeking partners, including Verizon, to launch a streaming version of ESPN, The Information reports. Verizon's CEO Hans Vestberg has expressed interest in collaborating with Disney for distributing the ESPN streaming service, and he has discussed with sports league executives earlier this year.


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  Meta Platforms (META) - Meta is telling employees they must adhere to the return-to-office policy, requiring most office-based employees to work in-person at least three days a week, Business Insider reports. Managers will monitor compliance and repeated failure could lead to job loss. Fully remote workers are exempt from this mandate. Elsewhere, a web version of the new text-first app Threads is set to be unveiled this week, WSJ reports.

HEALTHCARE:

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  Drug Prices - The Biden administration is to announce a list of 10 drugs targeted for price negotiations with pharmaceutical companies. The programme aims to lower drug costs for seniors on Medicare. The list might include common treatments for conditions like arthritis, blood disorders, heart disease, and diabetes, leading drug manufacturers to challenge the move in court.


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  Regeneron Pharmaceuticals (REGN) - Regeneron received approval from the FDA for its drug Veopoz (pozelimab) to treat the rare blood disease CHAPLE in both adults and children aged 1 year and older, Reuters reports. This marks the first FDA-approved treatment for this condition.


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  Medical Properties Trust (MPW) - Medical Properties responded to a WSJ regarding its transaction with Prospect Medical Holdings, which it said that it considers false and misleading. It said that MPT engaged with the WSJ to provide clarifications, but the article was published without them.


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  Moderna (MRNA), BioNTech (BNTX) - Positive mention for both in Barron's; the newspaper said both stocks were a buy given their strong drug pipelines and cash holdings.

MATERIALS:

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  DuPont (DD) - DuPont is in advanced discussions to sell its Delrin resins unit to private equity firm The Jordan Company for about USD 1.8bln, Bloomberg said. The deal could be announced this week, though no final decision has been reached. The move is part of DuPont's focus on specific sectors after reorganisation


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  Polymetal International (AUCOY) - Gold miner Polymetal plans to sell its Russian business within six months, FT reports. The move follows its relocation from Jersey to Kazakhstan, aiming to navigate complex exit restrictions and Western sanctions imposed by Moscow. The company hopes to find buyers among Russian miners and Chinese investors. The report adds that a discounted sale is likely.

INDUSTRIALS:

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  Old Dominion (ODFL) - Old Dominion Freight Line has offered USD 1.5bln to acquire Yellow's terminal portfolio out of bankruptcy, surpassing a previous USD 1.3bln bid from Estes Express Lines, Bloomberg reports. Both offers are stalking horse bids, setting the minimum price for a future Chapter 11 auction.

21 Aug 2023 - 09:30- Research Sheet- Source: Newsquawk