US EARLY MORNING: Equity futures are flat; growth risks dominate; huge week for macro and micro

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  SNAPSHOT: The tone was cautious in Asia, and European stocks opened on the back foot. Wires attribute global growth concerns. Ifo data for July out of Germany kept these concerns are the forefront of traders’ minds, with the group's economists warning of recession ahead. US equity futures are around flat ahead of a huge week on the macro and micro fronts. Treasury yields are mixed, but have tilted lower after the soft German Ifo data; the curve is modestly steepening. The Dollar Index is a little below neutral, with little deviation in other major FX. Crude futures are lower by almost a buck; Libyan oil production continues to recover, with the nation currently producing 800k BPD, and is expected to rise to 1.2mln BPD by August. The demand side of the crude equation is also being hit by recession fears. The day ahead is quiet (full calendar here), although the week ahead is very busy, with events like the FOMC and an initial look at US Growth in Q2; our week ahead note is here. On the micro front, a heavy week of tech earnings is ahead (weekly earnings expectations here).


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  MACRO: The week ahead is packed with key risk events. On the macro, the FOMC is expected to lift rates by 75bps on Wednesday, with traders looking to Chair Powell for guidance on whether the central bank signals similar moves ahead. Given the tendency of G10 central banks to surprise hawkishly with rate hikes recently, some suggest that there is a chance the Fed could move by a 100bps increment, although money markets currently assign only a 10% probability of this outcome; indeed, others have argued that the relative hawkishness from other central banks might even take the pressure off the Fed to move aggressively (a case in point: US inflation expectations eased in sympathy with those in Europe after the ECB’s surprise move last week, for instance). A first look at GDP data for Q2 on Thursday will be eyed to see if the US managed to avoid a “technical” recession following its contraction in Q1 (note: if growth tilts negative, many will take exception to classifying the current state of the US economy in recession given the robust labour market; for what it’s worth, the consensus looks for growth of 0.5% in Q2, which would avoid a “technical” recession). Some argue that the inflation narrative is priced and is now being surpassed by concerns regarding the growth outlook. Money market pricing currently sees the Fed lifting rates to around 3.5% by next year, but envisages rates being cut to below 3% by the end of 2023, in fitting with growth concerns. The Fed Chair has previously been confident on the US outlook, so his tone will be important, particularly if it has evolved, though given this meeting does not involve new economic projections, he may stick with his sanguine outlook. Former Fed Chair Yellen, and current Treasury Secretary, on the weekend conceded that US growth was slowing, acknowledging the possibility of a recession, but added that a downturn was not inevitable. Supply comes by way of 2s, 5s, 7s – the belly auctions will be of particular note given the central bank and growth impulses this week. Across the pond, energy continues to be a focal point in Europe, and there are likely to be some emergency meetings this week. Geopolitical focus will remain on Ukraine/Russia, although a Indo-Pacific trade and economics meeting will be virtually hosted by the US.


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  EARNINGS: There is a host of mega-cap earnings this week (while the slate is relatively quiet on Monday, UPS, KO, RTX, MCD, MSFT, TXN, V, GOOGL report on Tuesday; TMUS, BMY, BA, QCOM, META, F report on Wednesday; TMO, LIN, HON, MRK, PFE, CMCSA, AMT, MO, MA, AMZN, INTC, AAPL report Thursday; AZN, CVX, XOM, PG, ABBV report on Friday). Asside from commentary around inflation trends, macro traders will focus on remarks on hiring trends amid economic growth concerns, while remarks on the currency will also be of interest. Goldman Sachs notes that recent moves in FX which has seen EURUSD fall to parity are sharpening investor focus on the impact of USD strength on equities. “Our top-down S&P 500 earnings model shows that a 10% appreciation in the trade-weighted dollar should reduce EPS by 2-3%,” GS told its clients, “this roughly aligns with the 29% of aggregate S&P 500 revenues that are derived outside of the US according to company filings.” The bank notes that, by sector, IT firms are most exposed (foreign revenue exposures are around 59%) while Utilities will be most insulated (3% exposure). “Recent USD strength suggests many firms will miss 2Q revenue estimates, but our Domestic Sales basket has already outpaced our International Sales basket by 11ppts YTD, tracking the path of the trade-weighted dollar,” the bank added.

EQUITY NEWS:

CHINA NAMES:

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  China - China strengthened its warning to the US about House Speaker Pelosi’s visit to Taiwan, FT said, adding that sources said China was floating a possible military response. Elsewhere, US Deputy Secretary of State Sherman and US Ambassador to Australia Kennedy reportedly plan to visit the Solomon Islands next month, following China recently signing a security agreement with the Solomon Islands, which caused concern among some officials.


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  China Names - The FT reported that China was preparing a system to sort US-listed Chinese companies into groups based on the sensitivity of the data they hold, in a potential concession by Beijing to try to stop American regulators from delisting hundreds of groups. However, China’s securities regulator gave a statement to CNBC, stating that it had not researched the plan, adding that companies should comply with data security and listing rules, regardless of whether they were going public on the mainland or abroad.


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  China Property Names - China reportedly plans to set up a real estate fund worth up to USD 44bln, according to REDD.


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  China/EU - Neither the EU nor China believes that conditions are ripe for the implementation of the China-EU Comprehensive Investment Agreement, according to Chinese sources cited by SGH Macro.

ENERGY:

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  Gas Prices - US President Biden said gasoline prices were still too high, and he was working to ensure prices moved with oil prices, adding that energy companies should use profits to boost output.


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  Eni (E) - Eni’s request for gas supply to Italy via its Russian supplier has been partially confirmed for July 23rd; expects partial supply of gas to continue for the coming days.


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  Energy - EU countries are reportedly attempting to water down EC plans to cut gas demand by 15% from next month, FT reported. Plans will be discussed on Monday before an emergency Energy Ministers’ meeting on Tuesday. One proposal suggested compulsory targets should take into account each state’s dependency on Russian gas and storage.


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  Shell plc (SHEL LN) - Shell is reportedly mulling a sale of its 30% stake in UK oil field Cambo, according to Bloomberg.


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  TotalEnergies (TTE) - Announced the start of production from its Ikike field in Nigeria; will deliver peak production of 50k BOEPD by the end of 2022.


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  Energy - Baker Hughes US Rig Count (w/e July 22nd): Oil unchanged at 599, Nat Gas +2 at 155, Total +2 at 758.

INDUSTRIALS:

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  Siemens Aktiengesellschaft (SIEGY) - Siemens Sunday transferred a Canadian export license to Gazprom that allows turbines for the Nord Stream gas pipeline to be repaired and transported. The pipeline part may be on route to Russia by midweek, but there is no guarantee that the arrival of the turbine will boost gas flows, according to Bloomberg.


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  Boeing Company (BA) - A union representing nearly 2,500 employees at three Boeing defence locations in St. Louis rejected the company’s contract offer, and will strike at the locations starting August 1st, according to Reuters.


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  Toyota Motor Corporation (TM) - Toyota will  cancel orders for its SUV Harrier due to the fallout of the lockdown in Shanghai, according to the Nikkei.


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  Volkswagen (VWAGY) - Chairman Herbert Diess is to leave the board in September. Oliver Blume will be the new Chair; CFO Arno Antlitz assumes additional role as COO on the Group Board of Management.


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  Hyundai Motor Co (HYMLY) - A subsidiary of Hyundai used child labour at a plant that supplies an assembly line in Alabama, according to Reuters, which cited area police, the family of three underage workers, and eight former and current employees of the factory.

COMMUNICATIONS:

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  T-Mobile US, Inc. (TMUS) - Agreed to pay USD 350mln to settle class-action lawsuits brought over an August 2021 cyberattack in which a hacker infiltrated its computer systems to steal sensitive data relating to millions of customers, GeekWire reported. TMUS also agreed to make an additional USD 150mln investment in data security.


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  Tencent Holdings Limited (TCEHY) - A judge granted preliminary approval to a historic USD 100mln settlement between League of Legends studio Riot Games, which is owned by Tencent, and women who sued the company over gender discrimination, according to Axios.


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  Orange (ORAN) - Orange and Masmovil agree to combine operations in Spain, in a EUR 19bln deal.


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  Rogers Communications Inc. (RCI) - Rogers Communications will invest CAD 10bln in Artificial Intelligence over the next three years, Reuters reported. The announcement comes weeks after it reported network issues that caused widespread disruptions across the country.


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  Vodafone (VOD) - Reported Q1 revenue of EUR 11.3bln (exp. 11.3bln). It said it was on track to deliver its FY23 guidance. European growth has been supported by growth acceleration in the UK. Vodafone continues to actively pursue opportunities with Vantage Towers and strengthen European position.


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  Ubisoft (UBSFY) - The “unannounced premium game” that the company said last week was delayed is reportedly the next Assassin’s Creed, codenamed “Rift”, according to Bloomberg sources.


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  World Wrestling Entertainment, Inc. (WWE) - WWE chief McMahon retires amid sexual misconduct allegations, BBC reported. McMahon remains WWE’s majority shareholder, and his daughter Stephanie will serve as interim chairperson and co-CEO.

CONSUMER CYCLICAL:

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  Travel & Leisure Names - Hong Kong reportedly plans to cut hotel quarantine times, according to Sing Tao Daily.


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  Tesla, Inc. (TSLA) - Tesla is applying for public dollars in the US that would allow non-Tesla drivers to use its fast chargers, the WSJ said. Separately, the automaker is scheduled for court-ordered settlement talks in a shareholder lawsuit over CEO Musk’s 2018 tweets suggesting he had funding to take the company private, the Journal added, noting that Musk was also facing a five-day October trial in Twitter’s lawsuit seeking to compel him to complete his USD 44bln purchase, as well as a trial over his compensation package at Tesla. Elsewhere, Google co-founder Brin reportedly told his advisers to sell his personal investments in Tesla CEO Musk’s companies in recent months after learning that he had a brief affair with his wife, the WSJ said; Musk denied the report on Twitter.


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  Amazon.com, Inc. (AMZN) - Positive mention in Barron’s ahead of earnings this week, said that although Amazon’s stock has recently gotten crushed, there is a case that it could double, or even triple, from here.


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  YUM! Brands, Inc. (YUM) - Positive mention in Barron’s, which said restaurant stocks were finally coming back to life, and Yum looks like a good bet.


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  Academy Sports and Outdoors, Inc. (ASO) - Positive mention in Barron’s, said the ‘stock is still a winner’.

CONSUMER STAPLES:

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  Philips (PHG) – Q2 results missed forecasts, with the company citing lockdowns in China and supply chain issues. Q2 net income EUR -20mln (exp. 203mln), adj. EBITA EUR 216mln (prev. 532mln). PHG revised its FY22 outlook; now sees sales growth between 1-3%, and an approximately 10% adj. EBITA margin, driven by 6-9% comparable sales growth in H2. It will also take pricing actions due to inflation.

TECH:

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  Apple Inc (AAPL) - Apple has filed patents in self-driving and other vehicle software as well as in hardware related to riding comfort, such as seats and suspension, according to Nikkei.


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  Alphabet Inc. (GOOG) - Google fired a software engineer who recently claimed that its LaMDA AI bot was sentient. Google said the claims of the engineer Blake Lemoine were “wholly unfounded” and that he had shared confidential company information to third parties, Bloomberg reported.


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  Uber Technologies Inc (UBER) - Uber has accepted responsibility for covering up a 2016 data breach that affected 57mln passengers and drivers, as part of a settlement with US prosecutors to avoid criminal charges, Reuters reported.

HEALTH CARE:

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  AstraZeneca (AZN) - Enhertu has been granted priority review for HER2-low MBC.


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  Novartis (NVS) - Sandoz announced that the US FDA had accepted for review its Supplemental Biologics License Application (sBLA) for a high concentration formulation of 100 mg/mL (HCF) of its biosimilar Hyrimoz.

FINANCIALS:

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  Credit Suisse (CS) - The bank is considering additional job reductions and the implementation of cost cutting measures, according to sources cited by SonntagsZeitung.


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  Barclays PLC (BCS) - Barclays has snapped up a stake in the USD 2bln cryptocurrency firm Copper, Sky reported, which said Barclays was expected to invest a relatively modest sum in the millions of dollars.

UTILITIES:

EDF (ECIFY) - EDF will overhaul the design of its new reactor; intends to prevent future malfunctions by altering how the fuel rods are held, Telegraph reported.

REAL ESTATE:

Public Storage (PSA) - Public Storage announced a USD 2.3bln Special Dividend Related to PS Business Parks Merger Consideration.

25 Jul 2022 - 09:29- Research Sheet- Source: Newsquawk