US EARLY MORNING: Equity futures are around flat ahead of Fed Chair Powell

OVERNIGHT: Stocks were lower on Wall Street Monday, with defensive sectors faring better, while the Nasdaq 100 and Russell 2k led losses, as markets ramped their hawkish Fed expectations further in wake of the hot jobs report on Friday (see here). Asia traded mixed with sentiment subdued after the recent hawkish Fed re-pricing (see here), while the region also digested the RBA rate decision. European stocks opened flat, but selling pressures picked up in the minutes after the open, without an obvious headline catalyst (see here).

US-PREMARKETS: US equity futures are trading slightly lower ahead of remarks due from Fed Chair Powell; Yields are lower by 0-3bps across the Treasury curve, with the short-end outperforming. The market is almost completely pricing a 25bps rate hike at the Fed’s March, meeting, while expectations of the terminal rate have converged onto 5.00-5.25%, in line with the Fed’s SEP projections; the market sees small probability of a rate cut in November, but it is more meaningfully priced for December with around 85% conviction. The dollar Index is a shade lower, but remains above 103.50, with Powell’s remarks likely to influence how the buck trades in the near term. Crude benchmarks are trading higher, with desks noting some supply concerns after the earthquake in Turkey and Syria, as well as Saudi Arabia raising its March OSPs for most crude grades and regions.

DAY AHEAD:

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


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  RELEASED: The Australian central bank raised its cash rate by +25bps to 3.35%, as expected; Westpac said the Governor's statement was slightly more hawkish than in December, and the Aussie bank confirmed its forecast for the cash rate to peak at 3.85% in May. German industrial output declined in December by -3.1% M/M, a deeper fall than the expected -0.7%; the previous was revised up to 0.4% from 0.2% initially reported. Analysts at ING said the "terrible" report confirms the German economy's "sudden and hard halt" in December. France’s currency account deficit widened in December to EUR 8.5bln from 6.8bln. From the UK, January card spending data from Barclaycard showed consumer spending +9.7% Y/Y, boosted by New Year sales, film releases and holiday bookings; sales growth also helped by favourable comparison to January 2022. Elsewhere, Halifax reported that UK house prices were steady in January after slides in November and December; annual rate of house price growth slowed to +1.9% (from +2.1% in December)


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  US DAY AHEAD: Fedspeak is the key focus, with Chair Powell due to deliver remarks from the Economic Club of Washington (the event begins at 12:00EST, but Powell will speak from 12:40EST); he will likely reiterate the themes he touched on at his post-meeting press conference last week (you can get a recap of this in our central banks weekly note here), and reiterate that ongoing interest rate increases are still appropriate. Fed Governor Barr will also give remarks today. Ahead of the BoC’s meeting minutes on Wednesday, BoC Macklem will also be speaking; expect the Governor to reiterate that he is not even thinking about rate cuts yet.


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  FIXED INCOME SUPPLY: In Europe, the Netherlands will sell EUR 4-6bln of a 2033 DSL; Germany will sell EUR 0.70bln of a 2026 linker and a 2046 linker. The UK will auction GBP 3.5bln in 2027 Gilts. Stateside, the US will kick off this week's 3s, 10s and 30s supply with a USD 40bln 3yr note sale.


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  ENERGY: The API will release weekly energy inventories; this week, the street expects headline crude stocks to build by 2.2mln, distillates to draw y 0.5mln, though gasoline is expected to build 1.4mln. Elsewhere, the EIA will release its short-term energy outlook in the afternoon.


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  CORPORATE EARNINGS: The corporate earnings docket features FISV and VRTX on Tuesday; daily earnings expectations can be accessed here. Traders will be eying CVS, ETN, EMR, CME, D, DIS, ORLY on Wednesday, and AZN, PEP, TRI, PM, DUK, SPGI, ABBV, PYPL on Thursday; our weekly earnings expectations note can be accessed here.

EQUITY SPECIFIC NEWS:

COMMUNICATIONS:

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  Activision Blizzard Inc (ATVI) - Q4 adj. EPS 0.78 (exp. 1.51), Q4 GAAP revenue USD 2.33bln, Q4 net bookings 3.57bln (exp. 3.16bln); Q4 monthly active users 389mln (exp. 388.4mln), Q4 Activision Segment monthly active users 111mln (exp. 117.5mln), Q4 King monthly active users 233mln (exp. 238.4mln). No guidance was provided given impending MSFT deal; Activision said it was continuing to engage with regulators reviewing the transaction, working toward closing it in Microsoft’s FY ending June 30th.


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  Meta Platforms, Inc. (META) - US Senators Mark Warner and Marco Rubio, chair and vice chair of the US Senate Select Committee on Intelligence, wrote to Meta regarding documents that show it knew developers in China and Russia had access to user data that could be used for espionage, Reuters reports. The two said they had "grave concerns about the extent to which this access could have enabled foreign intelligence service activity, ranging from foreign malign influence to targeting and counter-intelligence."


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  Walt Disney Company (DIS) - Florida governor Ron DeSantis will have effective control of the board of the special tax zone that Disney has operated for more than 50 years under a new proposal from the US state’s lawmakers, FT reports, but the zone itself will remain largely intact under the proposal, after DeSantis appeared to have backed away from a threat to dissolve it altogether. FT explains that the legislation introduced aims to end a conflict that erupted in April, when DeSantis signed a bill to revoke Disney’s ability to govern the area around the Walt Disney World theme park in Orlando.


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  Take-Two Interactive Software Inc (TTWO) - Q3 adj. EPS 0.86 (exp. 0.87), Q3 revenue USD 1.41bln (exp. 1.45bln), Q3 net bookings USD 1.38bln (misses guidance). Announced cost cutting measures which will yield USD 50mln of annual savings. Exec said consumers shifted holiday spending toward established blockbuster franchises and titles that were offered with pricing promotions in light of macroeconomic conditions. "While our catalog benefited from this trend, it affected the performance of certain of our new releases and recurrent consumer spending for some of our console and PC games," exec adds. Sees Q4 net bookings between USD 1.31-1.36bln (exp. 1.49bln), and sees Q4 adj. EPS between 0.60-0.70 (exp.  1.03), with Q4 adj. EBITDA of USD 181-201mln (exp. 267.3mln). Lowers FY net bookings view to USD 5.2-5.25bln (prev. 5.4-5.5bln, exp. 5.48bln), cuts adj. FY EPS view to between 3.50-3.60 (prev. 3.85-4.10, exp. 4.05), and now sees FY adj. EBITDA between USD 895-915mln (exp. 960.4mln).


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  TikTok - US President Joe Biden said he was unsure if Washington would ban Chinese-owned video app TikTok.


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  Nintendo (NTDOY) - Nine-month net profit -5.8% Y/Y at JPY 346mln; operating profit -13% Y/Y at JPY 410mln; recurring profit -6% at JPY 482mln. Switch unit sales 14.91mln units (prev. 18.95mln). For the FY22/23, Switch unit sales were 18mln (prev. guided 19mln), and operating income was JPY 480bln (exp. 500bln).


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  Pinterest Inc (PINS) - Q4 EPS 0.29 (exp. 0.27), Q4 revenue USD 877.2mln (exp. 887.2mln); approves 500mln stock buyback programme. Q4 total MAUs 450mln (exp. 449.7mln), Q4 Canada MAUs 95mln (exp. 95.7mln), Europe MAUs 124mln (exp. 121.4mln), Rest of World MAUs 231mln (exp. 234.2mln). Q4 ARPU USD 1.96 (exp. 1.98), US and Canada ARPU 7.60 (exp. 7.58), Europe ARPU 1.01 (exp. 1.04). Announced CFO/Head of Business Operations Todd Morgenfeld will resign from Pinterest to pursue new career opportunities in July. Sees Q1 revenues growing between 1-3% (exp. 8.2%).


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  Comcast (CMCSA) - The telecommunications company's stake in BuzzFeed (BZFD) fell to 15.90% as of February 2nd from 19.97% as of January 30th. Follows a previous reduction its stake from 27.9% as of December 3rd, when it said it expected to sell additional BuzzFeed shares from time-to-time depending on market conditions.


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  Manchester United plc (MANU), TeamViewer (TMVWY) - TeamViewer CFO sees Manchester United sponsorship more likely ending in 2024 rather than 2023.


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  Madison Square Garden Entertainment Corp. (MSGE) - Is exploring a potential sale of its majority interest in Tao Group Hospitality. MSGE previously paid USD 181mln for a 62.5% stake.


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  Baidu Inc (BIDU) - Said its ChatGPT-styled project is called Ernie Bot and it is to complete internal testing in March before launching it publicly.

TECH:

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  SoftBank Group Corp. (SFTBY) - Posted a loss, and its Vision Fund was red for the fourth consecutive quarter. Nine-month net JPY -912.5bln (prev. 392.6bln), pre-tax JPY -290.0bln (prev. 1.23tln), revenue JPY 4.88tln (prev. 4.58tln Y/Y). For the Q3 period, net profit was JPY -783.4bln (exp. 205.9bln), net sales was JPY 1.69tln (exp. 1.68tln), while its Vision Fund lost JPY 660.1bln in Q3 (prev. 50.4bln Y/Y).


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  Skyworks Solutions, Inc. (SWKS) - Q1 adj. EPS 2.59 (exp. 2.61), Q1 revenue USD 1.33bln (exp. 1.33bln). Board authorised the repurchase of up to UDS 2bln of common stock. Sees Q2 adj. EPS at 2.02 (exp. 2.24), and sees Q2 revenue between USD 1.125-1.175bln (exp. 1.2bln).


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  Nokia (NOK) - S&P raises Nokia rating to the lowest level of investment grade at BBB-.


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  TeamViewer (TMVWY) - Q4 revenue rises, but too early to think about dividend, and will buy back EUR 150mln shares. Q4 revenue EUR 150.5mln (prev. 132.3mln), Q4 EBIT EUR 49.5mln (prev. 41.3mln). Will buy back EUR 150mln shares. Sees Manchester United sponsorship more likely to end in 2024 rather than 2023


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  Fabrinet (FN) - Q2 adj. EPS USD 1.90 (exp. 1.87), Q2 revenue USD 668.7mln (exp. 652mln). Q3 adj. EPS seen between USD 1.86-1.93 (exp. 1.84, and Q3 revenue seen between USD 640-660mln (exp. 657.6mln).


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  Diodes Incorporated (DIOD) - Q4 adj.EPS 1.73 (exp. 1.61), Q4 revenue USD 496.2mln (exp. 493mln). Sees Q1 revenue around USD 467mln +/- 3% (exp. 467mln).


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  Varonis Systems, Inc. (VRNS) - Q4 EPS 0.24 (exp. 0.17), Q4 revenue USD 142.6mln (exp. 140.7mln). Exec said that while still early, initial reception from customers and sales force to new SaaS product was encouraging, gives additional confidence in ability to weather current economic environment. Sees Q1 EPS between -0.05 to -0.04 (exp. -0.07), and sees Q1 revenue of USD 106-108mln (exp. 107.5mln). FY23 EPS seen betwen USD 0.33-0.35 (exp. 0.26), and FY23 revenue seen between USD 519-529mln (exp. 525.5mln).


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  ZoomInfo Technologies Inc. (ZI) - Q4 adj. EPS 0.26 (exp. 0.22), Q4 revenue USD 301.7mln (exp. 298.9mln). Sees Q1 adj. EPS between 0.21-0.22 (exp. 0.22), and sees Q1 revenue between USD 299-301mln (exp. 306mln). FY23 adj. EPS seen between USD 0.98-1.00 (exp. 0.95), and sees FY23 revenue between USD 1.275-1.285bln (exp. 1.31bln).

HEALTH CARE:

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  CVS Health Corporation (CVS), Oak Street Health, Inc. (OSH) - CVS is closing in on a deal to acquire Oak Street for about USD 10.5bln billion including debt, WSJ reports, which would expand its footprint of primary-care doctors with a large network of senior-focused clinics. WSJ say the companies are discussing a price of USD 39/shr, and a deal could be announced as soon as this week. CVS is scheduled to report earnings on Wednesday.


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  Bayer (BAYRY) - Activist shareholder Jeff Ubben has reportedly contacted other shareholders to rally support for big changes at the company.


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  Roche (RHHBY) - Announced positive data from global phase III programme for crovalimab in PNH.


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  AstraZeneca (AZN) - Forxiga was approved in the EU for the treatment of symptomatic chronic heart failure.

ENERGY:

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  BP (BP) - Reported record 2022 profits, boosts dividend, plans a further USD 2.75bln share buyback. Q4 adj. Net USD 4.81bln (exp. 5.11bln), Q4 revenue USD 69.3bln (exp. 59.5bln), Q4 adj. EPS 0.2644 (exp. 0.2713). Plans a further USD 2.75bln share buyback. Boosts dividend +10%. Exec said "Based on BP’s current forecasts, at around USD 60/bbl Brent and subject to the board’s discretion each quarter, expects to be able to deliver share buybacks of around USD 4.0bln per annum, the lower end of its capital expenditure range; has capacity for an annual increase in the dividend per ordinary share of around 4%. In the first quarter, BP expects oil prices to remain supported by recovering Chinese demand, ongoing uncertainty around the level of Russian exports and low inventory levels. Expects outlook for global gas prices during the first quarter to remain dependent on weather in the Northern Hemisphere and the pace of Chinese demand recovery. Expects industry refining margins to remain elevated in the first quarter due to sanctioning of Russian crude and product.


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  Siemens Energy (SMNEY) - Q1 net loss widened after issues at wind unit. Q1 revenue EUR 7.1bln (prev. 6.0bln Y/Y), Q1 net EUR -598mln (prev. -246mln). Cuts FY 2023 guidance to "loss on a similar level Y/Y" (prev. "reduction in prior loss"). Cuts its profit margin guidance +1-3% (prev. +2 to +4%). Reaffirms revenue and FCF guidance. CEO says charges related to Siemens Gamesa have been a serious setback.

INDUSTRIALS:

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  Boeing Company (BA) - Boeing will cut about 2,000 white-collar jobs in finance and HR through a combination of attrition and layoffs, Seattle Times reports. Exec said Boeing was "streamlining" as some of its corporate functions had grown quite large over time, "and with that growth tends to come bureaucracy or disparate systems that are inefficient."


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  Rolls-Royce (RYCEY) - Appointed a former BP exec to lead an overhaul of the company.


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  Alstom (ALSMY) - Bpifrance acquired a 5.1% stake for over EUR 500mln.


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  AECOM (ACM) - Q1 EPS 0.62 (exp. 0.81), Q1 revenue USD 3.38bln (exp. 3.34bln). Sees FY23 adj. EPS between 3.55-3.75 (exp. 3.67), and reiterated FY24 targets.


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  Spirit Airlines, Inc. (SAVE) - Q4 adj. EPS 0.12 (exp. 0.04), Q4 revenue USD 1.39bln (exp. 1.38bln). Sees Q1 ASM +13.2%, sees Q1 TRASM +23-24.5%; FY23 ASM seen +19-22%.

MATERIALS

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  Holcim (HCMLY) - To acquire US roofing company Duro-Last in a USD 1.29bln transaction.

CONSUMER CYCLICAL:

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  Bed Bath & Beyond Inc. (BBBY) - The retailer has lined up investors for a cash infusion that would allow it to stave off a bankruptcy filing, Bloomberg reports, and plans to issue convertible preferred securities and warrants in a deal that could raise more than USD 1bln.


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  Leggett & Platt, Incorporated (LEG) - Q4 EPS 0.39 (exp. 0.48), Q4 revenue USD 1.2bln (exp. 1.24bln). Q4 volume -12% due to continued demand softness in residential end markets, offset by growth in Automotive, Aerospace, and Hydraulic Cylinders businesses. Q1 EPS is expected to be 'down meaningfully' Q/Q due to timing of performance-based compensation accruals. FY23 EPS seen between USD 1.50-1.90 (exp. 2.06), FY23 revenue seen between USD 4.8-5.2bln (exp. 5.1bln).

CONSUMER STAPLES:

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  Carlsberg (CABGY) - Sees lower beer consumption impacting FY23 growth. FY22 revenue DKK 70.3bln (exp. 70.4bln). Organic volume growth +5.7%. Proposes +13% increase in dividend to DKK 27 per share, equal to a total dividend payout of DKK 3.7bn. "2023 will be another challenging year, but the strategic, organisational and financial health of our company is strong, and we are confident that our purpose-led and performance-driven culture will drive continued sustainable long-term value creation."


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  Chegg, Inc. (CHGG) - Q4 adj. EPS 0.40 (exp. 0.38), Q4 revenue USD 205.2mln (exp. 202.1mln). Q1 revenue seen between USD 184-186mln (exp. 200mlnmln); Q1 subscription services revenues seen in a range betwee 166-168mln, GM between 72-73%, adjusted EBITDA between USD 53-55mln. FY23 revenue seen between USD 745-760mln (exp. 817mln), and FY23 subscription services revenues in a range between USD 675-690mln, with quarterly contribution of approximately 24% in Q1, 26% in Q2, 22% in Q3 and 28% in Q4.

FINANCIALS:

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  Intercontinental Exchange, Inc. (ICE) - NYSE plans to pay in full majority of claims after glitch, depending on certain parameters. Bloomberg said that in practice, NYSE will only reimburse roughly 60% of the claims filed, while others may qualify for more.


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  BNP Paribas (BNPQY) - Q4 net income was short of expectations, but raised 2025 targets. Q4 revenue EUR 12.11bln (exp. 12.12bln), Q4 net income EUR 2.15bln (exp. 2.29bln). FICC Sales & Trading Revenue EUR 1.09bln (exp. 855.6mln). Equity & Prime Services Revenue -3.4% Y/Y. Announces a EUR 5bln share buyback programme in two tranches for 2023. Raises 2025 targets. Proposes to pay out a dividend of EUR 3.90/shr in cash, equivalent to a 50% pay-out ratio of 2022 distributable income.


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  Credit Suisse (CS) - Is reportedly delaying compensation day for some of its bankers.

REAL ESTATE:

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  Simon Property Group Inc (SPG) - Q4 FFO/Shr 3.15 (exp. 3.14), Q4 revenue USD 1.40bln (exp. 1.27bln). Retailer sales per square foot +5.6 Y/Y at USD 753, an increase of 5.6%. Sees FY FFO/Shr between 11.70-11.95 (exp. 12.12).

07 Feb 2023 - 09:30- Fixed IncomeResearch Sheet- Source: Newsquawk