US EARLY MORNING: Equity futures are higher and Treasury yields are lower as Fed pricing tilts dovishly in wake of CPI and FOMC minutes; PPI and weekly claims ahead

OVERNIGHT: In APAC trade, stocks were eventually mixed having initially opened lower. There was some caution as Japan initially predicted the latest N.Korean missile launch was in danger of landing in its Southwestern regions. In stock specifics, Alibaba (BABA) slumped on reports that Softbank has moved to sell almost all of its remaining stake in the company. China's trade surplus narrowed to USD 88.19bln in March from USD 116.88bln in February, higher than the expected USD 39.2bln; imports were better than expected at -1.4% Y/Y (exp. -5.0%, prev. -10.2%), but exports were surprising, rising 14.8% Y/Y (exp. -7.0%, prev. -6.8%). Pantheon Macroeconomics said the better performance was likely due to short-term factors related to lunar new year and COVID exit wave disruptions.  "In hindsight, the February and March strong manufacturing new export orders PMI was accurate for once, after a mixed track record: it signalled decline in H2 2021 and H1 2022, while exports kept growing." Aussie jobs data saw the unemployment rate remain at 3.5% against expectations of a small rise; participation also picked up to 66.7% from 66.6%, while the economy added 72.2k full time jobs in March. The solid data saw analysts predict that the RBA will likely fire a final 25bps hike in May. UK GDP estimate for February was 0.5% Y/Y (exp. 0.3%, prev. 0.4%), although the monthly measure was 0.0% M/M (exp. 0.1%); the 3M/3M estimate was 0.1% in February (exp. 0.0%). The UK stats office said monthly GDP was now 0.3% above the pre-COVID levels seen in February 2020. Analysts noted that the February data implies that the UK most likely avoided a recession in Q1, though may give the BoE more scope to continue policy tightening to rein in price pressures. Elsewhere, final inflation data out of Germany confirmed annual HICP at 7.8% Y/Y in March, and CPI at 7.4% Y/Y, both as expected.

US PRE-MARKETS: US equity futures are higher, Treasury yields are lower, while the Dollar Index is a touch beneath neutral. The balance of market pricing for the FOMC rate trajectory has moved dovishly in wake of the CPI data and FOMC minutes released Wednesday; headline inflation cooled by a little more than expected, putting less pressure on the Fed to tighten policy aggressively, although officials have still noted that inflation remains significantly above target, and the annual core measure actually ticked up, suggesting that the Fed must still avoid complacency. In recent months, traders have been trying to understand the factors that the Fed would need to see to either pause or pivot its course of normalisation; the FOMC's March meeting minutes may have given us a glimpse. The minutes said "several participants" considered whether it was appropriate to hold the target range steady, amid the struggles that were seen at some US regional banks. Note that in public, officials have generally been reticent to discuss the conditions that they'd need to see in order to pause or pivot from rate hikes. Offsetting that dovishness, however, "some participants" would have considered a +50bps rate rise if the banking issues were not ongoing, with "many" stating that incoming data before the onset of the banking-sector stresses had led them to see the appropriate path for rates as somewhat higher since recent inflation data indicated slower-than-expected progress on disinflation. The minutes also noted that the developments within the banking sector were likely to result in tighter credit conditions, though the exact impact was uncertain, as Chair Powell has himself noted. Currently, markets are pricing with over 70% certainty that the Fed will lift rates by 25bps at the May 3rd meeting, although around 50bps of rate cuts are priced through the end of this year, more dovish than the approximately 40bps of cuts that were being priced ahead of Wednesday's CPI release. Today's PPI and weekly initial jobless claims data will offer more insight on the growth and inflation dynamics, ahead of retail sales data out on Friday.

DAY AHEAD:

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


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  EUROPEAN DATA/SPEAKERS: Eurozone and Italian industrial output data for February are the only major items on the release slate. From the UK, BoE Bank Liabilities & Credit Conditions Survey for Q1 will be released. BoE's chief economist Pill will speak at the IMF conference on the UK economy and monetary policy. ECB's Lagarde and ECB's Panetta will also be attending further events at the IMF. Italy will sell between EUR 8.0-9.5bln of 2026, 2030, 2044 and 2037 debt; the UK will sell GBP 3.25bln of 2033 Gilts.


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  US DATA/SPEAKERS: US initial jobless claims for the week of April 3rd are expected to be little changed (exp. 232k vs prev. 228k), while continuing claims for the week of March 27th are expected to see small downside (exp. 1.814mln vs prev. 1.823mln). Producer prices for March are expected to show a cooling in the annual rate, to 3.0% Y/Y from a previous 4.6%, while the ex-Food & Energy gauge is expected to cool to 3.4% Y/Y from 4.4%. On the speaker's slate, BoC boss Macklem will be speaking at the IMF today. On the supply front, the US will announce sizes for next week's 5yr TIPS and 20yr bond sales. Today, the Treasury sells USD 18bln of 30yr bonds.


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  US CORPORATE EARNINGS: Results are due today from DAL, FAST, PGR; full earnings expectations can be accessed here.


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  ENERGY: OPEC will publish its monthly oil market report. EIA weekly NatGas storage change data are expected to show a build of 28BCF this week vs last week's draw of 23BCF.

EQUITY NEWS:

TECH:

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  Apple Inc. (AAPL) - Apple assembled more than USD 7bln of iPhones in India last fiscal year, tripling production in the country as it moves beyond China, Bloomberg reports. AAPL now makes around 7% of its iPhones in India, a jump from the estimated 1% in 2021. Separately, Apple is in talks with suppliers to make MacBooks in Thailand as the company continues to expand its manufacturing footprint outside of China amid geopolitical uncertainties, Nikkei reports. AAPL has been mass producing its Apple Watch in Thailand for more than a year, sources said, underscoring the growing importance of the country.


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  International Business Machines Corporation (IBM) - IBM is exploring a sale of its weather operation, as it seeks to streamline operations, WSJ reports. If a deal materialises, private-equity is most likely the buyer. The unit could be valued at more than USD 1bln; IBM purchased the business in 2015 in a deal worth more than USD 2bln, WSJ added.


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  Taiwan Semiconductor Manufacturing Company (TSM) - TSMC has reportedly decided to build a fab in Germany jointly with local partners in a collaboration model similar to that for its ongoing fab project in Japan, according to the DigiTimes.

COMMUNICATIONS:

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  Manchester United plc (MANU) - Thomas Zilliacus has withdrawn from the Manchester United takeover process after becoming frustrated at the Glazers' decision to open up a third round of bidding, Manchester Evening News reported. The Raine Group have set a deadline of April 28th for final bids to be submitted, following two stages of bids. However the Finnish businessman expressed his frustration at another round, labelling the process a 'farce' and claiming the Glazers were 'maximising profit at the expense of Manchester United'.

ENERGY:

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  Chevron (CVX) - Chevron is finalising a production-sharing agreement with Angola and the DRC to operate shared offshore oil block, Bloomberg reports. There is a draft of the pact, and this month parties were invited to discuss development of the 14c block and the common interest zone.

CONSUMER DISCRETIONARY:

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  Alibaba Group (BABA), SoftBank Group (SFTBY) - SoftBank has moved to sell almost all of its remaining shareholding in Alibaba, limiting its exposure to China and raising cash, FT reports. Softbank has sold around USD 7.2bln of Alibaba stock this year via prepaid forwards after a record USD 29bln selldown last year, the report said. The forward sales will eventually cut SoftBank’s stake in BABA to just 3.8% from a peak of 34%.


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  Harley-Davidson, Inc. (HOG) - Gina Goetter will step down as CFO at the end of April to accept a role as finance chief of Hasbro. A formal search process for the selection of a new CFO has been initiated by the company. Until that process is concluded, Vice President David Viney will also serve as Interim CFO.


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  Hasbro, Inc. (HAS) - Announced executive leadership team appointments: toy and entertainment industry veteran Tim Kilpin has been appointed President, Toy, Licensing & Entertainment; Gina Goetter will succeed Deborah M. Thomas, assuming the role of CFO.

INDUSTRIALS:

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  United Parcel Service, Inc. (UPS) - The Teamsters union said it would not begin the planned contract talks with UPS next week, unless regional supplemental contracts are completed, Reuters reports.

FINANCIALS:

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  UBS Group AG (UBS), JPMorgan Chase & Co. (JPM) - UBS has hired JPMorgan to explore a possible IPO of Credit Suisse's domestic business, Inside Paradeplatz reports.


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  JPMorgan Chase & Co. (JPM) - It is alleged that JPMorgan Chase was aware by 2006 that Jeffrey Epstein had been accused of paying cash to have underage girls and young women brought to his home — seven years before the bank dropped him as a client, FT reports citing court documents.


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  Citizens Financial Group, Inc. (CFG) - Announced that Richard Stein will assume the role of Chief Risk Officer upon the retirement of Malcolm Griggs in Q1 2024.


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  Franklin Resources, Inc. (BEN) - Reported prelim month-end AUM of USD 1,422.1bln at the end of March (vs USD 1,416.5bln at February-end). BEN said this month's increase reflected the impact of positive markets, partially offset by long-term net outflows.


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  AllianceBernstein Holding (AB) - Reports preliminary AUM of USD 676bln at end-March (vs USD 665bln at end-February). Said the +2% M/M increase was driven by market appreciation, partially offset by firm-wide net outflows.


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  Invesco Ltd. (IVZ) - AUM increased +1.7% M/M; saw net long-term inflows of USD 0.5bln in the month, non-management fee earning net inflows were USD 1bln and money market net outflows were USD 3.8bln.


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  SiriusPoint Ltd. (SPNT) - SiriusPoint has acknowledged an indication of interest from Third Point and affiliates to explore a potential acquisition. The Board will carefully evaluate the proposals when they have been received.

HEALTH CARE:

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  Fusion Pharmaceuticals Inc. (FUSN), AstraZeneca PLC (AZN) - Fusion Pharmaceuticals receives IND clearance for Alpha therapy FPI-2068, which it is jointly developing with AstraZeneca. Fusion will be operationally responsible for the Phase 1 study, while AstraZeneca will be responsible for subsequent clinical development. The companies will share costs equally through clinical development.

13 Apr 2023 - 09:30- Data- Source: Newsquawk