US EARLY MORNING: Equity futures are little higher; banking sector developments helps support sentiment, though some are still concerned after data showed lending at the Fed's Discount Window surged

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  OVERNIGHT: Wall Street was risk-on on the global banking support theme, after SNB gave a lifeline to Credit Suisse while 11 large US banks teamed up to help First Republic (FRC) (see here). Asian stocks were positive amid the improved global risk appetite after recent distressed bank lifelines (see here). European equity indices open the last trading session of the week on the front foot, underpinned by the positivity in the banking sector, although the broad Stoxx 600 and the narrow Eurostoxx 50 gauge of blue chips are both on course for a second straight week of losses (see here).


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  US PRE-MARKETS: Equity futures are slightly higher, with developments in the banking sector supporting the mood, although some have clearly been spooked by the rise in the use of funding at the Fed’s Discount Window (see below). Treasuries are mostly rallying by 0-3bps, although the 2s sector stands out, where yields are higher by a few bps. The Dollar Index is lower, currently just above the 104.00 mark, as the EUR rallies on the better risk mood, while the JPY is gaining against the buck due to yield differentials. Other activity FX is mostly higher, as too are crude benchmarks. The highlight on the data slate is the University of Michigan’s sentiment data (which contains inflation expectations), as well as the industrial and manufacturing prints for February. Elsewhere, there may be some additional focus on the ECB’s TLTRO.III repayment for the March window; given the central bank’s +50bps rate hike this week, the higher rate could prompt some of the "healthier" banks to repay earlier than otherwise needed, analysts said, but ING notes that banks needed to tell the ECB by Wednesday evening their decision, which some suggest makes it more likely that they would cling onto their liquidity, which could imply a lower repayment number.


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  FED'S DISCOUNT WINDOW: Weekly Fed balance sheet data released Thursday revealed that lending at the Fed's discount window spiked by a record amount; the central bank's 'emergency loans' stood at USD 318bln (vs USD 15bln W/W). Its new BTFP programme total outstanding amount was USD 11.9bln as of March 15th; Fed said there was USD 15.9bln total collateral under new bank term funding programme; the Fed balance sheet size jumped to USD 8.69tln on March 15th, from USD 8.39tln on March 8th, the highest since November; other credit extensions rose to USD 142.8bln as of March 15th from zero on March 8th. Capital Economics said that it showed the scale of the stresses in the financial system, and was a far more severe liquidity crunch than at the start of the pandemic (emergency loans peaked at USD 130bln then), and not far off the financial crisis peak of USD 437.5bln in 2008. "The size of the spike in the Fed’s emergency lending underlines that this is a very serious crisis in the banking system that will have significant knock-on effects on the real economy," CapEco wrote.


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  WEEKLY FLOWS: Bank of America weekly flow report says an equity capitulation has not happened. BofA Bull & Bear Indicator sees a sharp drop to the lowest since January 2023 at 3.5 (from 4.2) on weaker credit flows and worsening breadth in stocks. BofA noted strong USD 112.7bln flows into cash, USD 0.6bln into gold, and a modest USD 26mln outflow from equities, and a USD 2.3bln outflow from bonds. The USD 113bln inflow to cash was the largest since April 2020, though Q1 2023 cash inflows are on course to be highest since Q2 2020, BofA said. In fixed income, it noted a flight to quality, where Treasuries saw the largest inflows since May 2022 at USD 9.8bln, while EM debt saw its biggest outflows since November 2022 at USD 3.1bln. In equities, BofA says there has been no capitulation, with equity flows unchanged on the week; "if equity outflows this week had paced the redemptions seen during Lehman bankruptcy and Covid crash, then equity outflows would be USD 30-50bln, BofA says, and that has not happened.

DAY AHEAD:

• Today is  Quadruple Witching.


• Our real time events calendar can be accessed here; a PDF version can be accessed here.


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  EUROPE: Final Eurozone inflation data for February is expected to be confirmed at 8.5% Y/Y. There will also be attention on Labour Costs data for Q4, as well as Wages data for Q4. The ECB will announce its TLTRO.III repayment for the March window, and given its +50bps rate hike this week, the higher rate could prompt some of the "healthier" banks to repay earlier than otherwise needed, analysts said, but recent banking turmoil could serve as a headwind to this logic, given liquidity needs.


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  NORTH AMERICA: The prelim University of Michigan sentiment survey for March will be looked at, with a particular focus on the consumer inflation expectations components; earlier in the week, the NY Fed's Consumer Expectations Survey showed expected inflation one-year from now eased to 4.2% in February from 5.00% in January, to the lowest since May 2021. Elsewhere, Industrial and Manufacturing Production data for February, the Leading Index for February as well as Canadian PPI and RMPI for February are all due.


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  RATINGS: Today's ratings agenda includes possible reviews from S&P on Spain, DBRS on Netherlands, Fitch on Turkey, and Moody's on Greece.


• 
  ENERGY: Weekly Baker Hughes rig count data is due.

STOCK NEWS:

FINANCIALS:

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  Fed's Discount Window - Weekly Fed balance sheet data released Thursday revealed that lending at the Fed's discount window spiked by a record amount; the central bank's 'emergency loans' stood at USD 318bln (vs USD 15bln W/W). Its new BTFP programme total outstanding amount was USD 11.9bln as of March 15th; Fed said there was USD 15.9bln total collateral under new bank term funding programme; the Fed balance sheet size jumped to USD 8.69tln on March 15th, from USD 8.39tln on March 8th, the highest since November; other credit extensions rose to USD 142.8bln as of March 15th from zero on March 8th. Capital Economics said that it showed the scale of the stresses in the financial system, and was a far more severe liquidity crunch than at the start of the pandemic (emergency loans peaked at USD 130bln then), and not far off the financial crisis peak of USD 437.5bln in 2008. "The size of the spike in the Fed’s emergency lending underlines that this is a very serious crisis in the banking system that will have significant knock-on effects on the real economy," CapEco wrote.


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  First Republic Bank (FRC) - Large US banks together deposited USD 30bln into First Republic Bank to help bolster its finances. Bank of America (BAC), Citigroup (C), JPMorgan (JPM), Wells Fargo (WFC) will each deposit USD 5bln, while Goldman Sachs (GS) and Morgan Stanley will each deposit USD 2.5bln. BNY Mellon (BNY), PNC Bank (private), State Street (STT), Truist (TFC) and US Bank are each depositing USD 1bln.


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  First Republic Bank (FRC) - First Republic said that as of March 15th, it had a cash position of USD 34bln, not including USD 30bln of uninsured deposits. Said insured deposits from March 8th-15th have remained stable. From March 10th-15th, Bank borrowings from Fed varied from USD 20bln to USD 109bln at the overnight rate of 4.75%. Since March 9th, it raised short-term borrowings from Federal Home Loan Bank (FHLB) by USD 10bln at 5.09%. Daily deposit outflows have slowed considerably. It has suspended its common stick dividend. It is focused on reducing its borrowings and evaluating composition and size of balance sheet going forward.


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  Credit Suisse (CS), UBS Group AG (UBS) - Credit Suisse and UBS are reportedly opposed to the idea of a forced combination, Bloomberg reports.


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  Credit Suisse (CS) - The bank is being sued by shareholders in the US over a failure to disclose material weakness in internal controls and significant Q4 outflows.


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  Credit Suisse (CS) - The bank said its average Liquidity Coverage Ratio was unchanged between March 8th and March 14th, despite the banking crisis, Reuters reports.


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  Charles Schwab (SCHW) - Clients have reportedly withdrawn USD 8.8bln from its prime funds in 3 days, Bloomberg said.


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  Coinbase Global, Inc. (COIN) - Said it was investigating elevated error rates across both its web and mobile platforms. Some customers may have had issues trading or selecting assets to withdraw. Coinbase said "funds are safe."


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  Deutsche Bank (DB) - Total compensation was +3.0% Y/Y at EUR 10.2bln. Proposed a dividend of EUR 0.30/shr (prev. 0.20/shr).

INDUSTRIALS:

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  FedEx Corp (FDX) - Q3 adj. EPS 3.41 (exp. 2.73), Q3 revenue 22.20bln (exp. 22.74bln). Said Q3 results were negatively affected by continued demand weakness particularly at FedEx Express. Continued to move with urgency to improve efficiency, said cost actions were taking hold, now expects to achieve more than USD 4bln in annualised structural cost reduction by end of FY25. Exec said it expects US headcount to be down around 25k Y/Y by end of fiscal year in May. Expects market conditions to continue to negatively impact revenue and operating profit in Q4, but raises FY adj. EPS view to USD 14.60-15.20 from 13.00-14.00 (exp. 13.56).


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  L3Harris Technologies, Inc. (LHX), Aerojet Rocketdyne Holdings, Inc. (AJRD) - Aerojet stockholders voted to approve the company's proposed acquisition by L3Harris Technologies.


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  Lockheed Martin Corporation (LMT) - US State Department approved the potential sale of Lockheed-made AGM-114R2 Hellfire missiles for an estimated USD 150mln, the Pentagon announced.


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  Nikola Corporation (NKLA) - Said that the move to transition battery manufacturing from California to Arizona was expected to be complete by April, months ahead of the original schedule.

MATERIALS:

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  Alcoa Corporation (AA) - Announced the closure of its Intalco aluminium smelter in Washington State, which has been fully idle since 2020. The announcement begins a process to prepare the site for new economic development opportunities. AltaGas (ALA) has acquired the rights to develop and own approximately 1,600 acres at the Intalco site. Permanently closing Intalco's 279,000 metric tons of annual capacity will bring Alcoa Corporation's global consolidated capacity to 2.69mln metric tons, including a combined 399,000 metric tons at two other smelters in the United States. Alcoa will record charges in Q1 of approximately USD 120mln, or USD 0.67/shr.


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  Rio Tinto (RIO) - The miner spent more than AUD 15.3bln with Australian suppliers in 2022, an increase of almost +9% Y/Y.


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  US Steel (X) - Issues a Q1 preannouncement, sees Q1 adj. EPS between USD 0.58-0.63 (exp. 0.41), and Q1 adj. EBITDA around USD 375mln (exp. 304.8mln). Said Q1 flat-rolled segment adj. EBITDA is expected to be lower than Q4 levels, while Mini Mill segment is expected to return to positive EBITDA in Q1.

ENERGY:

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  BP plc (BP) - US accused BP of 10 serious violations after an explosion killed two workers at an Ohio oil refinery last year, FT reports. A Department of Labor’s investigation found operating and training failures at the Toledo refinery had contributed to the accident in September 2022.

COMMUNICATIONS:

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  ByteDance (private), Oracle Corporation (ORCL), Walmart Inc. (WMT) - Conversations between ByteDance's TikTok and potential buyers are heating up, NY Post reports. TikTok is mulling over its options, exploring possible deals it considered when President Trump had threatened to ban the app in 2020, a source said, withouth elaborating further. NY Post notes that the talks orchestrated by the Trump administration had included a proposal for Oracle (ORCL) to partner with Walmart (WMT) to own a US TikTok subsidiary, taking control of US user data and content moderation.

HEALTH CARE:

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  UnitedHealth Group Incorporated (UNH), EMIS Group plc (EMIS LN) - UK regulators say UnitedHealth's GBP 1.2bln deal to buy Emis could reduce competition. UNH has five working days to offer legally binding proposals to the CMA to address this.


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  Sarepta Therapeutics (SRPT) - Slipped almost 20% after hours after it was announced that the FDA determined that Sarepta should face FDA’s panel of outside experts on Duchenne gene therapy.


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  Amgen (AMGN) - Announced that it would cut around 450 jobs, less than 2% of its workforce, its second round of layoffs this year. Amgen said these changes would help it realign expense base in the face of intensifying pressure on drug prices and high levels of inflation.


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  Merck & Co., Inc. (MRK) - Provides update from Open-Label Arm of Phase 2 KeyVibe-002 Trial Evaluating MK-7684A, a Coformulation of Vibostolimab and Pembrolizumab, in Previously Treated Patients with Metastatic Non-Small Cell Lung Cancer (NSCLC).


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  Novartis AG (NVS) - FDA granted approval for Tafinlar + Mekinist for the treatment of pediatric patients 1 year of age and older with low-grade glioma with a BRAF V600E mutation who require systemic therapy. The FDA also approved liquid formulations of Tafinlar and Mekinist.


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  Sanofi (SNY) - Announced that it will cut prices of insulin by 78% in the US, and cap out of pocket costs at USD 35 for all patients with commercial insurance from January 1st, 2024. Sanofi's moves follow similar undertakings from Eli Lilly (LLY) and Novo Nordisk (NVO), as well as pressure from some US lawmakers.

CONSUMER DICRETIONARY: 

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  Volkswagen (VWAGY) - Board member Thomas Schmall said it wants its battery unit PowerCo to become a global battery supplier, not just produce for Volkswagen's own need, and it intends to invest in mines in order to reduce the cost of battery cells and meet half of its own demand and have the ability to sell to 3rd parties, Reuters reports.

REAL ESTATE

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  Equity Residential (EQR) - Raises quarterly dividend +6% to USD 0.6625/shr (exp. 0.625). Exec said increased dividend reflects the current strength of its business, and confidence in its prospects going forward.


• 
  UDR, Inc. (UDR) - Raises quarterly dividend +11% to USD 0.42/shr.

17 Mar 2023 - 09:00- Research Sheet- Source: Newswires