US EARLY MORNING: Equity futures are around flat; Big Tech mixed; FOMC to hike +25bps, traders seek guidance on future moves

US PREMARKETS: US equity futures are around flat, Treasuries are higher, with the belly outperforming. The Dollar Index is flat. Big Tech earnings were mixed on Tuesday, with Alphabet rising after top- and bottom-line beats, though Microsoft (MSFT) was lower in extended trading after issuing soft guidance, as was Snap (SNAP). Today, we hear from Meta Platforms (META), while there are other large cap names on the schedule to report, including Coca-Cola (KO), Boeing (BA) and AT&T (T). The Fed is expected to lift rates by 25bps at today’s policy meeting, though the outcome has been largely discounted, and traders will be more attentive to any guidance on future moves, with many already seeing the Fed arriving at Terminal after today’s hike (see below for our preview).

FOMC PREVIEW: The Fed is widely expected to hike rates 25bps in July, taking the target for the Federal Funds Rate to 5.25- 5.50%. Markets, and the majority of economists, expect this to be the peak of the hiking cycle, despite Fed guidance for two more rate rises this year (including July). Therefore, attention will lie heavily on any guidance from Powell in his press conference, but he is likely to reiterate a data-dependent approach and not commit to any future decisions, noting they will be taking each meeting as it comes. Any language around the June dot plots, and whether they are still a reasonable estimate after cool inflation data will be key. Note, Fed speakers since the inflation data still noted two more hikes is a reasonable projection and Powell is likely to do the same. Many, including Goldman Sachs, see the Fed in an every-other-meeting stance, implying a skip in September, and then deciding what to do in November based on the data - but markets and economists primarily expect July to be the last hike with many forecasting a continued cooling of inflation. Recent data has shown an easing of price pressures alongside a resilient economy, although there has been some loosening in the labour market, it is still above pre-COVID averages, and the slowdown is not enough to signal an immediate recession. When combining the data, it supports the argument of a soft landing. However, it is worth noting that although inflation is slowing, the Fed will be reluctant to declare victory just yet in case of a repeat of the 1970s, but Powell did previously state the balance of risks is now more balanced in terms of doing too much or too little. (Newsquawk)

TODAY'S AGENDA:

• Out interactive online calendar can be accessed here; a pdf version can be found here.


• 
  EUROPEAN DAY AHEAD: The data slate is thin, with Eurozone money supply and loans data the only notable release in the morning. Germany will auction EUR 4.0bln of 2030 Bunds.


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  US DAY AHEAD: Weekly MBA mortgage applications data will be released in the premarket. New home sales for June, and revisions of building permits are also due. The main event is the FOMC policy meeting, where a 25bps ate hike is expected (our preview is above). The BoC's meeting minutes are due for publication today too. On the supply front, the Treasury will sell USD 24bln of 2yr FRNs.


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  ENERGY: The DoE weekly energy inventory report will be published. The API's data released on Tuesday reportedly showed headline crude stocks posting a surprise build of +1.3mln (exp. -2.0mln), though inventories at Cushing drew down by -2.3mln; gasoline stocks -1.0mln (exp. -2.0mln), while distillate inventories +1.6mln (exp. -0.1mln). Elsewhere, Brent September 2023 (U3) options are due to expire today.

EQUITY NEWS:

TECH:

• 
  Alphabet (GOOGL) - Rose almost 6% afterhours following its Q2 earnings report. Q2 EPS 1.44 (exp. 1.34), Q2 Revenue 74.60bln (exp. 72.82bln); Q2 Revenue ex-TAC USD 62.07bln (exp. 60.27bln); Q2 Google advertising revenue USD 58.14bln (exp. 57.45bln); Q2 YouTube ads revenue USD 7.67bln (exp. 7.41bln); Q2 Google other revenue USD 8.14bln (exp. 7.17bln); Google Services revenue USD 66.29bln (exp. 64.67bln), Google Cloud revenue USD 8.03bln (exp. 7.83bln). CFO Ruth Porat will assume newly created role of President and Chief Investment Officer of Alphabet, but will continue to serve as CFO as the company searches for her successor. Exec said 80% of advertisers use at least one AI-driven search product, and ahead, ads will be displayed alongside AI results. Android 14 will include generative AI tools. CFO said the largest capex was for servers and AI computers.


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  Microsoft (MSFT) - Microsoft's Q4 earnings were solid, but guidance for Q1 was soft, and shares slipped 3.7% in afterhours trading. Q4 EPS 2.69 (exp. 2.55), Q4 Revenue 56.2bln (exp. 55.47bln); Q4 server products and cloud services revenue increased 17%, driven by Azure and other cloud services revenue growth of 26% (prev. 27%, exp. +25%). Q4 Productivity and Business Processes sales of USD 18.29bln (exp. 18.1bln). Q4 Intelligent Cloud sales of USD 23.99bln (exp. 23.8bln). Q4 More Personal Computing sales of USD 13.91bln (exp. 13.58bln). Q4 Quarterly capex 8.94bln (exp. 7.85bln). Microsoft guides Q1 sales USD between 53.8bln-54.8bln (exp. 54.9bln); sees Q1 Intelligent Cloud Revenue between USD 23.3bln-23.6bln (exp. 23.6bln); sees Q1 productivity and business processes revenue between USD 18.0bln-18.3bln (exp. 18.1bln); Q1 More Personal Computing Revenue 12.5bln-12.9bln (exp. 13.1bln). FY24 operating margins expected to remain flat Y/Y, FY24 capital expenditures to increase sequentially each quarter through the year.


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  Texas Instruments (TXN) - Texas Instruments fell over 3% following the publication of Q2 results, where the top- and bottom-lines exceeded expectations, but guidance was on the soft side. Q2 EPS 1.87 (exp. 1.76), Q2 Revenue 4.53bln (exp. 4.36bln). Q2 Analog sales USD 3.28bln (exp. 3.32bln), -18% Y/Y. Q2 Embedded processing sales USD 894mln (exp. 821mln), +8.9% Y/Y. CapEx 1.45bln (exp. 1.02bln). Sees Q3 revenue between USD 4.36-4.74bln (exp. 4.59bln), and sees Q3 EPS between USD 1.68-1.92 (exp. 1.90). Exec said it was not expecting to see any significant change in end markets in Q3 compared to this last quarter.


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  Intel (INTC), Ericsson (ERIC) - Ericsson will use Intel's 18A process and manufacturing technology for its future next-generation optimised 5G infrastructure. Intel will manufacture custom 5G SoCs (system-on-chip) for Ericsson to create highly differentiated leadership products for future 5G infrastructure. Additionally, companies will expand collaboration to optimise 4th Gen Intel Xeon Scalable processors with Intel vRAN Boost for Ericsson's Cloud RAN (radio access network) solutions to help communications service providers increase network capacity and energy efficiency.


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  SK Hynix (HXSCL) - Reported its third straight quarterly loss amid weak chip demand. Q2 net KRW -3.0tln (exp. -2.3tln), operating profit KRW -2.9tln (exp. -2.7tln), sales KRW 7.3tln (exp. 6.4tln). Exec said Q2 DRAM average selling price was up by a high single-digit % Q/Q and Q2 NAND selling price was down around 10% Q/Q. To expand NAND output cut due to high inventory and low profitability. SK Hynix said it would cut NAND output by a further 5-10%.


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  Oracle (ORCL) - Oracle won a copyright case against Rimini Street. The court ruled Rimini Street infringed Oracle's copyrights, removed copyright notices, and made false statements.

COMMUNICATIONS:

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  Dish (DISH), Amazon (AMZN) - Dish surged over 20% in afterhours trading after Bloomberg reported that it was planning to start selling a premium mobile service on Amazon.


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  Advertising Stocks - Elon Musk's rebranded Twitter cut ad prices, is offering 50% off any new booking of those ads until July 31st among other discounts, WSJ reports. The social media company is also threatening to pull verified status if brands do not achieve certain advertising spending thresholds, the report added.


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  Snap Inc (SNAP) - Q2 Adj. EPS -0.02 (exp. -0.04), Q2 Revenue USD 1.07bln (exp. 1.05bln); Q2 DAUs 397mln (exp. 395.2mln), +14% Y/Y. Q2 North America sales USD 686.8mln (exp. 689.5mln), -9.5% Y/Y, Europe sales USD 182.1mln (exp. 169.2mln), +7.1% Y/Y, rest of the world sales USD 198.7mln (exp. 195.5mln), +28% Y/Y. Exec said revenue growth remained challenged in Q2 as some headwinds from ad platform changes continued into the quarter. Sees Q3 adj. EBITDA loss of between USD 50-100mln (exp. loss 2mln), Q3 revenue seen between USD 1.07-1.13bln (exp. 1.13bln), and Q3 DAUs estimated between 405-406mln (exp. 406.3mln).

CONSUMER:

• 
  Amazon (AMZN) - The FTC is finalizing an antitrust lawsuit against Amazon, which may lead to breaking up parts of the company, Politico reports. Expected in August, it aims to challenge various business practices and could reshape Amazon's massive empire under FTC Chair Lina Khan's legacy.


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  Alibaba (BABA) - Alibaba affiliate Ant Group is said to plan a restructuring which could pave the way for a Hong Kong IPO, according to Bloomberg.


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  US Consumer Stocks - Investors are staying cautious on US consumer stocks despite the stock market's gains, avoiding US consumer companies vulnerable to economic downturns, due to lingering recession fears, according to an analysis published in the FT.


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  British American Tobacco (BTI) - H1 sales GBP 13.41bln (exp. 13.39bln). Diluted EPS 1.7600 (prev. 1.8160). On track to meet its FY23 guidance.


• 
  Stellantis (STLA) - Posted strong H1., where adj. EBIT margin was 14.4% (prev. 14.5%), FCF EUR 8.7bln, adj. EBIT EUR 14.1bln (prev. 12.1bln), Net Profit EUR 10.9bln, +37%, Net Revenue EUR 98.4bln (prev. 98.4bln). CEO said it is well positioned for remainder of 2023, inflationary environment more stable, wants to accelerate cost cutting.


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  Nissan (NSANY), Renault (RNSLY) - Nissan and Renault have reached a final agreement on alliance revamp, according to a statement; Nissan to invest up to EUR 600mln in Renault's EV unit Ampere.


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  Nissan (NSANY) - Q1 net profit JPY 105.48bln (exp. 76.7bln), Q1 operating profit JPY 128.6bln (exp. 120.3bln), Q1 sales JPY 2.92tln (exp. 2.73tln). Forecasts FY23/24 Japan vehicles sales of 529k units (prev. 510k).


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  Aston Martin (ARGGY) - H1 revenue GBP 667.4mln (exp. 296mln), Net GBP -142.2mln. (exp. -57mln). Said it was on track to substantially achieve FY24/25 targets.


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  Hyundai Motor Company (HYMTF) - Q2 net KRW 3.2tln (exp. 3.3tln), oper. KRW 4.2tln (exp. 4.0tln), sales KRW 42tln (exp. 41tln). Expects 2023 operating profit margin to be 8%-9% and 2023 capex at KRW 10.5tln.


• 
  Porsche AG (PAH3 GY) - Sales EUR +14%, operating profit +10.7%, confirms 2023 forecasts.


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  LVMH (LVMUY) - Reported slowdown in US, though saw China demand rebound. Q2 revenue EUR 21.21bln (exp. 20.6bln); US sales fall 1%. Does not expect further price hikes in near term. Pleased with China performance.


• 
  EssilorLuxottica (ESLOY) - H1 revenue meets expectations, confirms growth target. H1 revenue EUR 12.85bln (exp. 12.78bln), Q2 revenue EUR 6.7bln (exp. 6.64bln). Saw EMEA double-digit growth in Q2, with China rebounding strongly, and North America positive. Q2 North America revenue 3.03bln (exp. 3.06bln). Confirms its target of mid-single-digit annual revenue growth from 2022 to 2026 at constant exchange rates.


• 
  Puma (PUMSY) - Sales and EBIT exceeds expectations.

FINANCIALS:

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  Banc of California (BANC), PacWest (PACW) - Banc of California and PacWest announce merger, and USD 400mln equity raise from Warburg Pincus and Centerbridge. PacWest stockholders will receive 0.6569 of a share of BANC common stock for each share of PACW common stock. 20%+ accretion to BANC's 2024 estimated EPS and immediately 3% accretive to TBVPS from deal.


• 
  Visa Inc (V) - Shares slipped 0.4% afterhours following results, as where it beats earnings expectations, but payments-volume growth slowed. Q3 EPS 2.16 (exp. 2.12), Q3 Revenue USD 8.1bln (exp. 8.06bln); Q3 Payments volume at constant currency +9% (exp. +7.91%); Q3 Cross-border volumes at constant currency +17% (exp. +17.9%); Q3 Change in cross-border volume nominal USD +18% (exp. +16.8%); Q3 Total Visa processed transactions rose 9.5% Y/Y to USD 54.0bln (exp. 53.46bln); Q3 Total Visa processed transactions +10%. Visa CFO said that travel into the US was still hovering at 2019 levels. In Q4, expects around +10% revenue growth.


• 
  Wells Fargo (WFC) - Wells raises quarterly dividend to USD 0.35/shr (prev. USD 0.30/shr), announces new USD 30bln share repurchase programme.


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  Deutsche Bank (DB) - Q2 revenue EUR 7.4bln (exp. 7.06bln), Q2 FIC Sales & Trading revenue EUR 2.10bln (exp. 1.97bln), Pretax profit EUR 1.4bln (exp. 1.19bln); Investment Bank revenue seen slightly lower in 2023.


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  Santander (SAN) - Q2 net EUR 2.67bln (exp. 2.58bln); NII EUR 10.5bln (exp. 10.4bln). Net loan-loss provision EUR 2.90bln (exp. 3.03bln). Revenue EUR 14.3bln (prev. 12.8bln Y/Y); said it was on track to meet 2023 target. Confident to remunerate shareholders in line with 50% payout.


• 
  UniCredit (UNCRY) - Q2 revenue EUR 5.97bln (exp. 5.62bln), Q2 Net Profit EUR 2.31bln (exp. 1.86bln), Net Interest EUR 3.50bln (exp. 3.35bln). CET1 16.6% (exp. 16.50%). FY23 net profit seen at equal/above 7.25bln (exp. 6.64bln), FY revenue expected to be over EUR 21.5bln (exp. 22.02bln), and FY net interest income expected to be equal/above EUR 13.2bln (exp. 12.58bln).


• 
  Deutsche Boerse (DBOEY) - Q2 sales beats expectations at EUR 1.22bln, raises FY23 revenue guidance. Q2 revenue EUR 1.22bln (exp. 1.17bln), EPS 2.52 (prev. 1.98 Y/Y). Expects to exceed its guidance for 2023. Raises FY23 view.


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  Lloyds (LYG) - Noted an impairment charge of GBP 700mln in Q2 earnings. Q2 statutory pretax GBP 1.61bln (exp. 1.72bln). Interim dividend +15% Y/Y to GBP 0.92/shr.


• 
  NatWest (NWG) - CEO steps down immediately due to the Nigel Farage account leak.

REAL ESTATE:

• 
  CoStar Group (CSGP) - Q2 adj. EPS 0.31 (exp. 0.30), Q2 revenue USD 606mln (exp. 607.2mln). Sees Q3 adj. EPS between USD 0.29-0.30 (exp. 0.30), Q3 revenue seen between USD 622-627mln (exp. 632.4mln). Lifts FY23 EPS view to between USD 1.24-1.26 (exp. 1.22), but lowers FY23 revenue outlook to between USD 2.45-2.46bln (exp. 2.48bln) due to expectations of lower property transaction volumes.

MATERIALS:

• 
  Rio Tinto (RIO) - H1 profits fall on lower iron ore prices. H1 adj. net income USD 5.7bln (exp. 6.0bln), adj. EBITDA USD 11.7bln (exp. 12.3bln), interim dividend 1.77/shr. Said there was strong demand for portside product in China. Simandou iron ore project in Guinea is advancing at pace, final approvals expected later in the year. Expects Oyu Tolgoi shafts 3 and 4 to be commissioned in H1-2024. Expected to have made financial commitments to industrial abatement projects representing over 15% of group emissions by 2025.


• 
  Ashland (ASH) - Q3 adj. EPS 1.23 (exp. 1.27), Q3 revenue USD 546mln (exp. 546.5mln). Exec said the reset impact from customer destocking actions across supply chains continues to impact many of the markets it serves. Expectations that destocking would conclude in Q3 proved to be optimistic, adding that there was still uncertainty as to when these dynamics will end. "Until the inventory-control actions taken by our customers have subsided, it will remain difficult for us to gauge current near-term end-market demand." Reiterates FY23 revenue and FY23 adj. EBITDA outlook.


• 
  Kaiser Aluminum (KALU) - Q2 EPS 1.26 (exp. 0.46), Q2 revenue USD 814mln (exp. 801.6mln). Exec said demand for aerospace products remained a key highlight. Demand in packaging remained healthy, even as destocking with beverage customers persisted. Warrick operation continues to stabilise following the ratification of a new four-year labour agreement with USW-represented employees.


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  Anglo American (NGLOY) - Da Beers cycle 6 diamond sales USD 410mln (prev. 638mln Y/Y).

INDUSTRIALS:

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  Waste Management (WM) - Q2 adj. EPS 1.51 (exp. 1.54), Q2 revenue USD 5.12bln (exp. 5.23bln). Exec noted persistent inflation in many cost categories, lower-than-anticipated renewable energy prices, and slower-than-planned event-driven volumes. Sees FY23 revenue growth between 3.25-4.25% (exp. 20.7bln); downwardly revised financial outlook accounts for expectations for slower recycled commodity price recovery and lower event-driven volumes.


• 
  Crane (CR) - Q2 adj. EPS 1.10 (exp. 0.93), Q2 revenue USD 510mln (exp. 512.8mln). Raises FY23 adj. EPS outlook to between USD 3.80-4.10 (exp. 3.86), sees total sales growth of approximately 6% (prior 5%), core sales growth of approximately 5-7% (prior 4-6%).


• 
  Robert Half (RHI) - Tumbled over 12% following earnings, where it issued soft guidance. Q2 EPS 1.00 (exp. 1.14), Q2 revenue USD 1.639bln (exp. 1.69bln); talent solutions were impacted by elongated client hiring cycles resulting from ongoing global macro uncertainty. Sees Q3 EPS between 0.76-0.90 (exp. 1.14), and sees Q3 revenue between USD 1.48-1.58bln (exp. 1.66bln).


• 
  Rolls-Royce (RYCEY) - Upgraded guidance. Now expects underlying operating profit between 1.2-1.4bln (exp. 934mln). Said it is starting to see the impact of transformation across all divisions.

ENERGY:

• 
  Energy Inventories - API's data released on Tuesday reportedly showed headline crude stocks posting a surprise build of +1.3mln (exp. -2.0mln), though inventories at Cushing drew down by -2.3mln; gasoline stocks -1.0mln (exp. -2.0mln), while distillate inventories +1.6mln (exp. -0.1mln).


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  Equinor (EQNR) - Q2 adj. net USD 2.25bln (exp. 2.35bln), Net income USD 1.83bln (exp. 2.32bln), declares ordinary cash dividend of USD 0.30/shr with continued extraordinary dividend of USD 0.60/shr. Said it increased production capacity at Johan Sverdrup.


• 
  Subsea 7 (SUBCY) - Q2 sales exceeds expectations. Q2 revenue USD 1.5bln (exp. 1.35bln), adj. EBITDA USD 162mln (exp. 159mln).

HEALTHCARE:

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  GlaxoSmithKline (GSK) - Q2 revenue GBP 7.18bln (exp. 6.83bln), adj. EPS 0.38 (exp. 0.35); Q2 adj. operating profit GBP 2.17bln. Q2 dividend 0.14/shr, 0.56/shr expected for FY23 (exp. 0.571/shr). FY23 guidance upgraded. ; sees adj. EPS growth of +14-17% (prev. guided +12-15%), adj. operating profit growth seen +11-13% (prev. guided +10-12%), and sees FY sales growth of +8-10%.


• 
  Teladoc (TDOC) - Q2 sales USD 652.4mln (exp. 648.9mln), Q2 EBITDA USD 72.1mln (exp. 65mln). Lifts lower end of its prior FY guidance range; sees Q3 EBITDA of USD 80mln (exp. 76mln).

26 Jul 2023 - 09:01- Fixed IncomeData- Source: Newsquawk