US EARLY MORNING: Equity futures are flat ahead of more bank earnings

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  OVERNIGHT: On Wall Street, stocks firmed Monday, paring early losses into the close amid spot VIX printing 52-week lows beneath 17, while the VIX futures curve steepened further into contango despite the Dollar bouncing higher (our US wrap can be accessed here). APAC were mostly subdued, failing to benefit from the slew of data from China including stronger GDP growth (see below for our review) with the mood tentative across global markets ahead of upcoming earnings releases stateside (our APAC wrap is here). The European start was positive, with traders digesting China’s Q1 and March data, as well as UK jobs numbers; earnings have also been coming in on the encouraging side (our European open note is here). 


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  US PRE-MARKETS: US equity futures are slightly better than unchanged, Treasury yields are little changed, while the Dollar Index is a little lower. China Q1 GDP and activity data were constructive (see our recap in the section below) and analysts have been upping their growth views for the world’s second largest economy in wake of the release, but it has not generated any meaningful upside stateside. Instead, traders seem to be focussed on another round of bank earnings due today (BAC, BK, GS on deck) after a mixed showing out of the sector so far.


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  US BANK EARNINGS: Results have been mixed so far; while earnings reports from some of the bigger banks released last week eased concerns around the Financials sector, reports from custodian banks State Street (STT) and M&T Bank (MTB) on Monday – as well as broker Charles Schwab (SCHW) – showed their deposits shrinking in the quarter, renewing concerns about the health of the industry following the collapse of Silicon Valley Bank (SIVB) and Signature Bank (SBNY) last month. Reuters notes that last week’s Fed update showed deposits at all commercial banks rose in the week ending April 5th; deposits at the largest US banks are sitting at above levels seen before the collapse of Silicon Valley Bank and Signature Bank, however, deposits at smaller banks are still short of their previous levels. Today, Bank of America (BAC) and Goldman Sachs (GS) report their numbers for the quarter, while there will also be more attention than usual on earnings due from the custodian Bank of New York Melon (BK) as well.

DAY AHEAD:

• Our full interactive calendar can be accessed here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: The data slate is thin again, with the only notable data releases survey data from the ZEW; the street looks for improvement at the headline level for both Germany and the EU. There are no ECB speakers scheduled to speak, but Norway’s Norges Bank Governor Bache will be speaking on the Government Pension Fund, while the central bank's Longva will speak on CBDC. On the supply front, Netherlands will sell between EUR 1-2bln of DSLs, while the UK will auction GBP 2.25bln of 2053 Gilts.


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  NORTH AMERICAN DATA/SPEAKERS: US housing starts and building permits are both seen moderating in March. Canada will release CPI data for March, where headline inflation is expected to accelerate a little in the month, although the annual measures -- including the core measures -- are seen easing; more detailed thoughts are available in our weekly briefing here. The Fed’s Discount Rate minutes will be published in the afternoon, and traders will be looking for any clues about how recent banking woes have changed the attitudes of respondents. Fed voter Bowman will be speaking in the session, although her focus will be on digital currencies rather than monetary policy or the outlook. In Washington, there are two Committee meetings of note today: The Senate Budget Committee will hold a hearing entitled "A Rigged System - The Cost of Tax Dodging by the Wealthy and Big Corporations" at 15:00BST/10:00EDT; the House Financial Services Committee will hold a hearing on "Oversight of the Securities and Exchange Commission" with SEC Chair Gary Gensler at 15:00BST/10:00EDT.


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  US CORPORATE EARNINGS: Earnings reports are due from JNJ, BAC, GS, LMT, PLD, NFLX; our full earnings estimates are available here. Notable companies reporting this week include:; ASML, ELV, ABT, MS, TSLA, IBM on Wednesday; BX, TSM, T, PM, AXP, UNP on Thursday; PG on Friday; our full Weekly US Earnings Estimates can be accessed here.


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  US BANK EARNINGS: Results have been mixed so far; while earnings reports from some of the bigger banks released last week eased concerns around the Financials sector, reports from custodian banks State Street (STT) and M&T Bank (MTB) on Monday – as well as broker Charles Schwab (SCHW) – showed their deposits shrinking in the quarter, renewing concerns about the health of the industry following the collapse of Silicon Valley Bank (SIVB) and Signature Bank (SBNY) last month. Reuters notes that last week’s Fed update showed deposits at all commercial banks rose in the week ending April 5th; deposits at the largest US banks are sitting at above levels seen before the collapse of Silicon Valley Bank and Signature Bank, however, deposits at smaller banks are still short of their previous levels. Today, Bank of America (BAC) and Goldman Sachs (GS) report their numbers for the quarter, while there will also be more attention than usual on earnings due from the custodian Bank of New York Melon (BK) as well.


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  ENERGY: API will publish weekly energy inventory data after hours; this week, analysts expect headline crude stocks to draw down by 2.5mln, distillates to draw by 1.8mln, and gasoline stocks to draw by 1.9mln.


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  WEEK AHEAD: The week ahead includes CPI data from Canada, Japan, NZ, UK; PBoC LPR, China activity data; Minutes from the ECB, RBA. Our week ahead preview can be accessed here.

DATA RECAPS:

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  CHINA DATA: Q1 GDP and March activity data were better than expected; annual GDP rose to 4.5% Y/Y (exp. 4.0%), albeit there was a favourable base effect given the virus disruptions seen in Q1 2022. Nevertheless, analysts note that output is now 6.8% higher than the recent trough in Q2 2022, and analysts seem optimistic about the rest of the year. Retail Sales data were also encouraging, printing 10.6% Y/Y (exp. 7.4%). Industrial Output rose to 3.9% Y/Y from 2.4% previously, but was a little short of the 4.0% consensus. Fixed asset investment was also a little short of expectations, rising 5.1% Y/Y (exp. 5.7%). But in aggregate, the data has been received positively. Capital Economics notes that the economy was still recovering rapidly at the end of Q1, and high frequency data suggest the rebound continued into April. "Admittedly, industry appears to have lost some momentum this month, but the signals on services remain positive," CapEco writes, adding that "the speed of the recovery has exceeded even our relatively upbeat expectations." It now thinks official GDP growth could hit 6.0% this year, and "in practice, growth is likely to be even higher given that the official GDP figures understated the extent of last year’s downturn."


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  RBA MINUTES: Although the central bank left rates unchanged in April, minutes from that meeting suggest that it could still resume rate hikes at the May meeting, with policymakers discussing the case for a +25bps move in April as inflation remained too high and the labour market was very tight; but the RBA paused to assess the impact of its tightening efforts. "The case for an increase is much stronger than was the case for the April meeting," Westpac says, noting that unlike the minutes for the March meeting, the Board did not specifically commit to considering a pause at the next meeting. Additionally, the recent minutes state that while members also noted that the forecasts produced by the staff in February had inflation returning to target range only by mid-2025, and that it would be inconsistent with the Board’s mandate for it to tolerate a slower return to target; Westpac says these forecasts were conditioned on monetary policy being tightened a little further.


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  UK JOBS DATA: 31k payrolls were added in March, cooling from 98k prior, while the claimant count rose by 28.2k after a fall of 18.8k in February. The February data showed employment rising by 169k, topping expectations of 50k, though the ILO Unemployment Rate rose to 3.8% (exp. 3.7%, prev. 3.7%). On the wages front, average earnings (ex-bonus) were up 6.6% in February, unchanged after revisions, but still hotter than the 6.2% consensus, while the average weekly earnings measure for the 3-month Y/Y period was 5.9% in February, above the expected 5.1%, but unchanged from the prior 5.9%. Pantheon Macroeconomics said the data showed that the slowing trend in wage growth was still visible, despite revisions to previous data. "The labour market is not nearly as hot as the employment figures imply," PM writes, and "several timely indicators suggest that employment will merely hold steady in Q2 as businesses seek savings in the wake of the jump in borrowing costs." It argues that on the face of it, the labour market still looks very tight, but the proportion of inactive people that say they would like a job has increased to the highest since June 2021, and in addition, some of the people who recently have become self employed likely are working less than they would like and so represent hidden slack. "Accordingly, the MPC’s forecast for Y/Y growth in whole-economy total pay to slow to 4.0% by the end of this year still looks credible," Pantheon says, "the upward revision to the wage data, however, have raised the chances of the MPC hiking Bank Rate again next month; a further 25bp now looks like a toss-up, with the odds likely to shift decisively tomorrow after the publication of March’s consumer prices report."

EQUITY NEWS:

FINANCIALS:

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  BlackRock, Inc. (BLK) - BlackRock, who was retained by the FDIC to sell the USD 114bln of securities from the failures of Silicon Valley Bank (SIVB) and Signature Bank (SBNY), will begin selling securities on Tuesday, Bloomberg reports.


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  Pinnacle Financial Partners, Inc. (PNFP) - Q1 EPS USD 1.76 (exp. 1.72), Q1 revenue USD 401.8mln (exp. 421.2mln). CEO said "for community and regional banks, it was a remarkable quarter. We were all impacted by the failure of two well-known banks. There was much concern over the amount of deposit growth regional banks could sustain, if any, as a result of the anxiety created by these two banks." PNFP retained substantially all of its clients, and grew clients' deposits at an annualised growth rate of 9.6% Y/Y in Q1, a portion of which came after the two bank failures.


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  UBS (UBS) - UBS announced modifications to its USD 6bln share buyback programme amid its acquisition of Credit Suisse (CSGN SW). Instead of cancelling the repurchased shares as initially intended, UBS plans to allocate some of the shares for the takeover. UBS said its Board has decided not to implement a capital increase, in the interest of shareholders. Instead, the already-issued own shares of UBS shall be used to complete the merger.

INDUSTRIALS:

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  Fluor Corp (FLR) - US DOE selected FLR's joint venture Hanford Tank Waste Operations & Closure to execute the Hanford Integrated Tank Disposition Contract. The new contract has an estimated ceiling of USD 45bln over a 10-year ordering period for environmental management operations at the Hanford Site in Washington state.


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  J.B. Hunt Transport Services Inc (JBHT) - A falloff in container imports into the nation’s West Coast along with weaker domestic trucking volumes pushed J.B. Hunt Transport Services’ Q1 results lower Y/Y, Freight Waves reported. Q1 EPS 1.89 (exp. 2.02), Q1 revenue 3.23bln (exp. 3.4bln).


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  MTU Aero Engines AG (MTUAY) - Q1 sales and profits top expectations. Prelim Q1 revenue EUR 1.54bln (exp. 1.41bln), Q1 adj. earnings EUR 211mln (exp. 172mln), Q1 FCF EUR 93mln (exp. 97mln). Maintains guidance.


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  United Parcel Service, Inc. (UPS) - UPS and the Teamsters union on Monday begun contract talks covering roughly 340k US drivers, package handlers and loaders at the global delivery firm, Reuters reports, adding that the stakes are high for union and management as recession threatens to cut in to business, and worker participation in unions sits at all-time lows in the US despite an uptick in labour activism.

MATERIALS:

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  Anglo American (NGLOY) - Chile's Ministry of Environment said a committee of ministers approved an environmental permit for a USD 3bln extension of Anglo's Los Bronces project in Chile.


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  ArcelorMittal (MT) - Establishes a renewable energy JV with Casa Dos Ventos, to develop a USD 800mln 554MW wind power project.


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  Glencore (GLNCY), Teck Resources (TECK) - Tech Resources' CEO confirmed it has not met with Glencore, earlier media reports of such a meeting were false. CEO also rebuffed reports that shareholder China Investment Corp favours the Glencore bid over Teck's split. Elsewhere, Legal & General (LGEN LN) opted to vote for Teck's plan to support the spin-off rather than support Glencore's plan; Legal & General is a shareholder in both Teck and Glenore.

ENERGY:

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  TotalEnergies (TTE) - Variable cost margins for European refiners jumped in the quarter. Total said it expects Q1 hydrocarbon production expected to exceed 2.5mln BOEPD, and sees variable cost margin European refining at USD 87.8/T. Refining and Chemicals results are expected to be higher given the sustained refining margins during the quarter.

CONSUMER:

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  British American Tobacco (BATS LN), Amazon (AMZN) - Italy antitrust regulators open probe on Amazon and British American Tobacco over misleading advertising for heated tobacco product, Bloomberg reports.


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  BMW (BMWYY) - Chair says it will export Minis made by Great Wall Motor JV.


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  Entain (GMVHY) - Q1 net gaming revenue rose on robust demand; Group Net Gaming Revenue +15% Y/Y, Online NGR +16% (in line with expectations), Retail NGR +14% Y/Y. Entain notes record levels of active customers in Q1, up +19% Y/Y (vs +14% proforma).


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  Geely Automobile Holdings (GELYY) - Zeekr unit is to enter most European markets by 2026.


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  NIO Inc. (NIO) - CEO said the automaker aims to add 200 battery swap stations every month, from June onwards.


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  Nissan Motor Co. (NSANY) - The automaker is planning to launch an EV designed specifically for the Chinese market. Intends to have seven EVs by 2026, and 80% of its line-up electric by 2030.


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  Pernod Ricard (PRNDY) - New Delhi City authority rejects Pernod's application to renew liquor sale licence citing an ongoing investigation, Reuters reports.

COMMUNICATIONS:

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  Fox (FOXA) - Shareholders are demanding company records that may show whether directors and executives properly oversaw Fox News' coverage of former President Trump's election-rigging claims, Reuters reports, in what could be a prelude to lawsuits seeking to make directors liable for costs.


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  Madison Square Garden Entertainment Corp. (MSGE) - MSG Entertainment has agreed to sell its 66.9% majority interest in Tao Group Hospitality to Mohari Hospitality in a transaction that values Tao Group Hospitality at USD 550mln. The transaction is expected to close in May. Upon completion, MSG Entertainment expects to receive net cash proceeds of approximately USD 300mln.


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  Media Entertainment - The Writers Guild of America has passed a strike authorisation vote with 97.85% voting in favour, giving union leadership the power to call a strike once the contract expires on May 1st, Variety reported. The vote was widely expected and does not make a strike inevitable, the report said, the union has said that the goal was to increase negotiators’ leverage as talks go down to the wire. It added that some in the guild also argued that a higher percentage voting in favor would make a strike less likely, as it would communicate that the guild is united and make the studios less inclined to try to test its strength in a strike.


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  Spotify Technology (SPOT) - Spotify is losing another talk content executive, The Verge reports; Nir Zicherman, who leads the company’s new audiobook vertical, will be leaving the company this year. He will depart as one of the last remaining executives who built Spotify’s podcasting business.


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  Take-Two Interactive Software, Inc. (TTWO) - Chair Strauss Zelnick sold 68,351 shares on April 13th at USD 122.12/shr for USD 8.35mln.


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  Walt Disney Company (DIS) - Florida Governor Ron DeSantis has floated the idea of building a prison near Disney's Florida theme park, BBC reports. The threat, made smiling, came as he vowed to take new steps to assert state control over the special district that oversees the media giant's property.


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  Warner Bros. Discovery, Inc. (WBD) - Warner Bros. has revealed the existence of a new Harry Potter game, 'Harry Potter: Quidditch Champions', a competitive multiplayer game based on the fictional sport popularized by the Harry Potter novels, The Verge reports. There are no details on when the game will be released, or on what platforms, but it has been in development for several years.

TECH:

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  Ericsson (ERIC) – Reported better than expected Q1 earnings, but warns that a pullback in 5G spending in some mature markets will continue, Bloomberg said. Q1 net sales SEK 62.6bln (prev. 86bln), Q1 EPS SEK 0.45 (exp. 0.58), Q1 EBIT SEK 3bln (exp. 2.615bln), Q1 adj. EBIT SEK 4.0bln (exp. 3.28bln). Sees Q2 adj. EBITA margin at mid-single-digit level. Following the strong cash flow in Q4, Q1 cash flow was negative, it said, seasonally impacted by pay-out of accrued employee-related expenses. In Q2, it expects operators to remain cautious with capex investments and continue to adjust inventories. CFO will step down at the end of Q1 2024, and a recruitment process will be initiated.


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  Splunk Inc. (SPLK) - Min Wang named Chief Technology Officer, effective immediately.

HEALTH CARE:

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  AbbVie Inc. (ABBV) - FDA approved expanding the indication of QULIPTA for the preventive treatment of migraines in adults. The approval makes QULIPTA the first and only oral calcitonin gene-related peptide receptor antagonist approved to prevent episodic and chronic migraine.


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  AstraZeneca PLC (AZN) - GRAIL and AstraZeneca presented new data from a study assessing the feasibility of a pan-hematologic malignancy classifier based on GRAIL's methylation platform as a potential tumour-agnostic, plasma-based cell free DNA minimal residual disease test. The study showed that GRAIL's methylation technology had a cancer detection rate of 92% in patients with relapsed or refractory disease across six hematological malignancies.


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  GSK plc (GSK) - Reached an agreement to acquire Bellus Health (BLU) for a total equity value of GBP 1.6bln.

UTILITIES:

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  Algonquin Power & Utilities Corp. (AQN) - Shareholder Ancora Holdings Group said it was pleased that the AQN decided to terminate its stock purchase agreement with Kentucky Power Company and AEP Kentucky Transmission Company following months of widespread pushback from shareholders, and called for management to establish momentum on its previously disclosed plan to sell USD 1bln in assets.

18 Apr 2023 - 09:30- Fixed IncomeData- Source: Newsquawk