US EARLY MORNING: Equity futures are around flat and Treasury yields are lower ahead of a huge week which includes CPI, FOMC, retail sales, as well as other G10 central banks

SNAPSHOT: US equity futures are trading a little beneath neutral, likely eying a huge week for the US economic narrative, with the release of inflation data on Tuesday, the FOMC rate decision on Wednesday, and November retail sales data on Thursday. There are also the other macro events to contend with, like the ECB, BoE and SNB policy meetings in Europe (all of those coming on what is shaping up to be Super Thursday). Accordingly, the price action seen last week (positioning trades in thin liquidity) may continue to be a feature today. US Treasury yields are 0-3bps lower, with the long-end outperforming; the Treasury will auction 3s and 10s today, and 30s tomorrow. The Dollar Index is lower, slipping beneath the 105.00 handle, although other major FX is struggling to take advantage, particularly in the EM space. Crude benchmarks are off by 20-40c, seemingly ignoring news that the Keystone pipeline remains shut, perhaps taking cues from the demand side, where COVID cases continue to tick up in China.

RECESSION AND THE S&P 500: Goldman Sachs reiterates that it sees the S&P 500 falling to 3,600 in H1 2023, before rebounding to 4,000 by the end of next year, although it notes that many of its own clients are expecting a more bearish outcome. In the event of a recession, GS thinks that the index could slip as low as 3,150. Goldman says that even if the US were to avoid a recession, earnings could fall next year due to more margin compression than it is expecting, while valuations could also surprise to the downside if the Fed needs to fire more rate hikes to put a lid on surging consumer prices by more than the market currently expects (at present, the market expects terminal to be between 4.75-5.00%, seen in March 2023; but expectations have crept into the 5.00-5.25% bracket on occasions recently, particularly after hawkish data releases). On the other side of the coin, GS says that upside risks could be seen if corporates are able to protect their margins and grow earnings, but the bank says this seems unlikely unless inflation remains high, and while a dovish Fed pivot would represent a tailwind to P/E multiples, it seems unlikely unless growth begins to disappoint more materially.

BUYBACKS: A new 1% levy on stock buybacks, which becomes effective in January, has not worried corporations to rethink strategies, WSJ reports. While it would cost companies billions, a number of execs expect to continue repurchasing company stock, the Journal said. In Q3, S&P 500 companies spent USD 210bln on buybacks, down 10% Y/Y; WSJ says companies in the S&P 500 would have paid a combined USD 1.93bln in taxes and lost about 0.45% in operating income had the levy been in effect for the quarter.

DAY AHEAD: There is not much scheduled for the day ahead (our daily calendar is here), but traders will be cognizant of other huge macro events this week including the Fed, US CPI, ECB, BoE, SNB, amongst others; our week ahead preview, preparing you for all of the key events for the coming week, can be accessed here. The general run of expectations is that central banks will be downshifting the pace of their rate hikes, while US inflation data may have a mixed feel. On the speakers front, Fed’s 2024 voter Bostic is due to speak today, according to Reuters, although we suspect there will be a lack of policy-related comments given the proximity to the FOMC meeting, and the Fed being in its pre-meeting blackout window); BoC chief Macklem will speak following last week’s larger rate hike, and will likely be quizzed on whether the Bank is now pausing on rate rises. Supply today comes by way of two auctions from the US Treasury, a USD 40bln sale of 3yr notes at 16:30GMT/11:30EST, and then a USD 32bln sale of 10yr notes at the usual 18:00GMT/13:00EST time.

TECH/COMMUNICATIONS:

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  VMware, Inc. (VMW), Broadcom Inc. (AVGO) - EU antitrust regulators poised to open a full-scale investigation into Broadcom's USD 61bln bid for VMware, Reuters reports.


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  IAC (IAC) - Positive mention in Barron's, which said that tech stocks are cheap, and IAC was a bargain, (a "textbook case of an undervalued stock that deserves more attention").

FINANCIALS:

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  London Stock Exchange (LNSTY), Microsoft Corporation (MSFT) - Microsoft will purchase around 4% equity stake in LSE, via the acquisition of shares from Blackstone/Thomson Reuters consortium. Will form a 10-year strategic partnership for next-gen data and analytics and cloud infrastructure, and the deal is expected to increase LSE revenue meaningfully over time.


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  Morgan Stanley (MS) - Plans to cut banker bonuses in Asia by up to 50% in 2022, according to Reuters; overall compensation in Asia is expected to decline by an average 30% due to the lower bonus pay-outs, the report added.


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  Bank of America Corporation (BAC) - CEO Moynihan told CNBC he has no intention to leave his role, responding to speculation that he was on a Biden administration short list to replace current Treasury Secretary Yellen if she steps down.


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  Blackstone Group (BX) - Blackstone warned that the launch of a new private equity fund Blackstone Private Equity Strategies Fund (BXPE) for wealthy individuals could be delayed, as it waits for fundraising conditions and financial markets to improve, and as it copes with heavy investor withdrawals at two other funds in real estate and credit, FT reports.


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  Credit Suisse (CS) - Head of Corporate Communications Cox and Greater China CEO Stoehr are to leave.


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  Ernst & Young - EY told US staff they would not receive holiday bonuses this year, becoming the latest large firm in the financial and professional services sectors to signal a challenging economic outlook, FT reports; the article adds that staff were told the economic outlook had darkened.

CONSUMER:

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  Albertsons Companies, Inc. (ACI) - A US judge extended a temporary restraining order blocking a USD 4bln dividend that Albertsons had planned to pay shareholders amid its plans to be bought by Kroger, WSJ reports. While the judge sided with Albertsons and Kroger, allowing Albertsons to pay the dividend, he also extended a temporary restraining order blocking the dividend until December 19th; without the extension, Albertsons could immediately issue the special dividend.


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  Lennar Corporation (LEN) - The US homebuilder is offering to sell thousands of homes to rental landlords at a time when sales to everyday buyers have slumped, Bloomberg reports. It is circulating lists of properties to potential acquirers.


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  Freshpet, Inc. (FRPT) - Activist Jana Partners, which owns a 9.9% stake, is pushing Freshpet to consider selling itself, and has hired recruiting industry expert Kurt Schmidt to help with its campaign, and possibly serve as director candidate, Reuters reports.


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  UK Retail - ASOS Plc (ASOMY) and its lenders (which includes Barclays, HSBC, Lloyds) are discussing whether to hire a restructuring expert following the departure of its CFO, Bloomberg reports, adding that no final decision has been made. Separately, Superdry (SEPGY) CEO has reportedly held talks with PE firms on a potential buyout, according to The Times.

AUTOS:

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  Lucid Group, Inc. (LCID) - Tesla CEO Musk swiped at its EV competitor, said news that Lucid was offering new purchase incentives for some of its vehicles showed it was "not long for this world."


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  Stellantis NV (STLA) - Will indefinitely halt operations at an Illinois plant in February, citing the rising costs of electric vehicle production, Reuters reports. The action will result in indefinite layoffs, and operations may not resume as it considers other options.


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  Mercedes-Benz (MBG), Rivian (RIVN) - The two pause partnership discussions on electric van production in Europe, according to Reuters.

INDUSTRIALS:

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  Boeing Company (BA), Airbus SE (EADSY) - Air India is close to ordering as many as 500 jetliners worth tens of billions of dollars from both Airbus and Boeing, Reuters reports. The orders include as many as 400 narrow-body jets and 100 or more wide-bodies, including dozens of Airbus A350s and Boeing 787s and 777s.


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  AP Moller Maersk AS (AMKBY) - Board announces planned CEO transition; CEO Soren Skou will be replaced by Vincent Clerc, currently CEO of its Ocean & Logistics business, effective January 2023.


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  Spirit Airlines, Inc. (SAVE) - Spirit has offered as much as a +43% cumulative weighted average pay raise to its pilots over two years, according to a union memo seen by Reuters; the report said the deal was more evidence of the bargaining power pilots are enjoying as carriers staff up to meet booming travel demand, and comes a week after Delta offered a 34% cumulative pay increase to its pilots over three years.


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  Telecom Italia (TIIAY) - Is exploring investor interest in buying its assets, Reuters reports.


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  Atos (AEXAY) - CEO says there will not be mass layoffs in France, have commenced the consultation and information process to adapt the organisation on a European level. Will examine all offers from investors, incl. foreign investors.

HEALTH CARE:

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  Horizon Therapeutics (HZNP), Amgen Inc. (AMGN) - Amgen to buy Horizon Therapeutics for about USD 26bln, or around USD 116.5 per Horizon share, and representing a 20% premium, Bloomberg reports. Deal could be announced in the coming days, but could be delayed, and talks could still fall apart, Bloomberg neatly caveated. Sanofi (SNY) dropped out of the bidding process.


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  CHR Hansen (CHYHY), NovoZymes (NVZMY) - Are to create a leading global biosolutions partner through a statutory merger of the two companies, combination expected to unleash full potential of biological solutions, generate significant value for stakeholders, with annual revenue of around EUR 3.5bln; no additional debt is expected to be issued for the transaction, and both boards unanimously recommend shareholders approved the merger.


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  CVS Health Corporation (CVS) - A mixed mention in Barron's, which notes that while the company's primary care bet hasn't yet come to pass, its valuation in cheap and has a unique mix of assets within its industry.


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  Roche (RHHBY) - Board proposes Nestle SA CEO Mark Schneider and Sterling Professor Akiko Iwasaki as new Board members.

ENERGY:

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  UK Energy - Greenpeace asks UK High Court for a judicial review of the Government's October decision to award 100 new North Sea licences, FT reports.

12 Dec 2022 - 09:17- Fixed IncomeData- Source: Newsquawk