US EARLY MORNING: Equity futures continue to tilt lower; weekly jobless claims due, while traders will also keep an eye on Eurozone inflation and ECB meeting minutes too

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  OVERNIGHT: On Wall Street, stocks Wednesday finished lower in wake of February's ISM Manufacturing PMI showing prices paid rising, as well as some hawkish Fed rhetoric (see here). Asia-Pac stocks were choppy with price action kept mostly rangebound after the uninspiring handover from Wall Street (see here). US is said to be lobbying allies on possible China sanctions if Beijing gives Russia military aid in Ukraine. The European open was mixed ahead of key inflation data out of the bloc in the morning, as well as ECB meeting minutes in the afternoon (see here) – we preview both events in our day ahead, below. Ahead of these releases, expectations of the terminal rate have been creeping towards 4.00% following hawkish regional inflation data reported earlier in the week.


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  US PRE-MARKETS: US equity futures have continued to tilt lower in wake of February's manufacturing ISM data published on Wednesday; the surge in yields has put pressure onto the duration-sensitive Nasdaq-100, which underperforms its major peers. US 10yr yields remain above 4.00%, with yields higher by around 2-4bps across the curve. There could be further data catalysts out today: Eurozone inflation and ECB minutes will be eyed before the start of the US day, and then weekly initial jobless claims and continuing claims (the latter coinciding with the survey period for the BLS jobs data, due next week) and revisions to Q4 unit labour costs and productivity will be in focus; the equity market bulls will be hoping that a report in the WSJ suggesting that the US labour market is showing signs of cooling materialise, in keeping with figures from ZipRecruiter and Recruit Holdings, which have shown that the number of job postings on their sites declined more late last year than the Labor Department's report on job openings for that period. Meanwhile, the USD is higher, tracking the upward rise in yields. Crude futures are a little above neutral.

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: European flash inflation data for March is the highlight; releases from Germany, Spain and France suggest that there could be upside risks for the headline measures. The ECB meeting minutes will be overshadowed by the inflation release, although could offer insight into whether there are any signs of compromises between hawks and doves, and any commitments with regards to the hike size at the March meeting. The Bank of England's Decision Maker Panel does not usually garner too much market attention, but some analysts have suggested keeping an eye on it for any signs of inflation persistence, particularly within the services sector; ING explains that policymakers want to see further changes in wage and price-setting behaviour in its own survey of businesses. Meanwhile, on the speakers' front, ECB's Schnabel will be speaking at a Money Market Contact Group event, while BoE Chief economist Pill will be speaking on the outlook.


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  US DATA/SPEAKERS: Weekly initial jobless claims and continuing claims data are due, the latter coinciding with the BLS’ survey period for the jobs report. Unit labour costs and productivity revisions for Q4 will also garner attention. On the speakers' slate, Fed's Waller (hawk, voter) speaks on the economic outlook, while Fed's Kashkari (voter) will deliver further remarks today.


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  ENERGY: EIA will release Nat Gas inventory data for the week of 20/Feb, and the street looks for a draw of 71BCF.


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  SUPPLY: Spain will sell between EUR 5-6bln of 2026, 2029, and 2033 Bonos, as well as between EUR 0.25-0.75bln of 2033 linkers. France will sell EUR 10.5-12.0bln of 2032, 2034, 2038, and 2060 debt. The UK will auction GBP 0.65bln of 2051 linkers. Our full G7 bonds auction note can be accessed here.


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  US CORPORATE EARNINGS: Major US corporates reporting today include AVGO, COST, Kroger (KR), Hormel (HRL), Best Buy (BBY); our daily estimates sheet can be accessed here.


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  PREVIEW - EUROZONE FLASH INFLATION (10:00GMT/05:00EST): Headline inflation is expected to ease to 8.2% Y/Y in February, from 8.6% in January; the core measure is seen unchanged at 5.3% Y/Y. German, French and Spanish prelim. Inflation figures have all been on the hawkish side, with a pronounced market reaction in the fixed income space seen in wake of their respective releases. From the ECB’s perspective, HICP is expected to average 6.3% in 2023 at 9.1% and 7.3% for Q1 and Q2 2023 respectively, according to its December macroeconomic projections. ECB chief economist Lane recently said that positive supply shocks and rate hikes have curbed inflationary pressures since December, with forward-looking indicators suggesting a slowdown, although he noted that the wage impact was more uncertain, and he made clear that rates could be held in restrictive territory for a number of quarters. Other central bank officials, including Schnabel and Villeroy, have noted strong wage growth and inflation potentially being persistent, with Schnabel explicitly saying the broad disinflation process is yet to begin. In terms of market expectations, a 50bps rate hike is expected at the ECB’s March meeting, and pricing is also tilting towards 50bps in May too; further out, the implied terminal rate is currently seen around 3.90% in December. Note, the ECB’s cut-off for technical assumptions that go into its economic forecasts is generally around three weeks prior to the gathering, which would imply the assumptions for oil and FX have already been cemented and generally the Euro area macroeconomic projections are finalised on, or just after the release of today’s flash EZ HICP.


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  PREVIEW - ECB MEETING MINUTES (12:30BST/07:30EDT): As expected, the ECB delivered another 50bps hike to the deposit rate and reaffirmed its tightening intentions by stating that it expects to unveil another 50bps adjustment in March. President Lagarde stated that this is warranted on account of underlying inflationary pressures, fiscal measures and wage growth. At the March meeting, the central bank said it would evaluate the subsequent path of its monetary policy. On the balance sheet, it announced that reinvestments will be allocated proportionally to the share of redemptions across each constituent programme of the APP. And at its post-meeting press conference, Lagarde said that the central bank’s economic assessment sees risks to the economic outlook and inflation as “more balanced”. Lagarde said the decision itself had a “large consensus”, adding that there was a discussion on communication, but not full agreement; any clarity on the extent of the disagreement will be of note to the market. For the policy path going forward, Lagarde noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover; this suggested that hopes for a pause in May could be disappointed. Furthermore, Lagarde attempted to stress the longevity of reaching terminal by stating that when the level is reached, rates will need to stay there. As always, the account of the meeting will be viewed in many quarters as being “stale”, particularly as the March meeting and accompanying macro projections are expected to set the course for monetary policy in the Eurozone for H1.

STOCK SPECIFIC NEWS:

TECH:

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  Salesforce Inc (CRM) - Q4 adj. EPS 1.68 (exp. 1.36), Q4 revenue USD 8.38bln (exp. 7.99bln). Q4 subscription and support revenue USD 7.79bln (exp. 7.41bln), Q4 services revenue USD 1.92bln (exp. 1.88bln), Q4 platform & other revenue USD 1.56bln (exp. 1.52bln), Q4 marketing & commerce revenue USD 1.18bln (exp. 1.14bln), Q4 subscription and support data revenue USD 1.34bln (exp. 1.2bln). Boosts share repurchase programme to USD 20bln. Sees Q1 adj. EPS between USD 1.60-1.61 (exp. 1.32), and sees Q1 revenues between USD 8.16bln-8.18bln (exp. 8.05bln). For the FY, sees adj. EPS between 7.12-7.14 (exp. 5.78), and FY revenue is seen between USD 34.5bln-3.7bln (exp. 34.05bln). In wake of the earnings announcement, activist investor Elliott Investment Management said the update represented progress towards regaining investor trust. "The acceleration of margin targets, commitment to responsible capital-return priorities, creation of a business transformation committee and disbanding of the M&A committee are necessary steps forward," and "are consistent with our recommendations," but added that much work remains: "Salesforce needs a sustainable leadership plan and a board that demonstrates it can provide accountability through proper oversight."


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  Snowflake Inc. (SNOW) - Q4 EPS 0.14 (exp. 0.04), Q4 revenue USD 589mln (exp. 575.7mln), Q4 product revenue +54% Y/Y at USD 555.3mln, Q4 remaining performance obligations +38% Y/Y at USD 3.7bln. Board authorised a USD 2bln stock buyback programme. Announces multi-year expansion of partnership with Amazon Web Services (AMZN). Sees Q1 product revenues between USD 568-573mln (exp. 582mln), and sees FY product revenues of USD 2.705bln (exp. 2.8bln).


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  Splunk Inc. (SPLK) - Q4 EPS 2.04 (exp. 1.15), Q4 revenue USD 1.25bln (exp. 1.07bln), Q4 ARR USD 3.654bln (exp. 3.669bln). Sees Q1 revenue between USD 710-725mln (exp. 807mln), and sees Q1 ARR around USD 3.7bln. FY24 revenue seen between USD 3.85-3.90bln (exp. 4.02bln), sees FY24 total ARR between USD 4.125-4.175bln (exp. 4.26bln), sees FY24 FCF between USD 775-795mln (exp. 680mln).


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  SoftBank Group Corp. (SFTBY) - SoftBank-backed Arm Ltd has reportedly ruled out a UK listing for now to focus on its US IPO, FT reports.


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  Box, Inc. (BOX) - Q4 adj. EPS 0.37 (exp. 0.34), Q4 revenue USD 256.5mln (exp. 256.1mln). Q4 remaining performance obligations +16% Y/Y at USD 1.245bln, Q4 billings +6% Y/Y at USD 357.1mln. Sees Q1 adj. EPS between 0.26-0.27 (exp. 0.30), and sees Q1 revenue between USD 248-250mln (exp. 260.24mln). For FY24, sees adj. EPS between USD 1.42-1.48 (exp. 1.47), and sees FY24 revenue between USD 1.05-1.06bln (exp. 1.1bln).


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  DoubleVerify Holdings, Inc. (DV) - Q4 EPS 0.25 (exp. 0.11), Q4 revenue USD 133.6mln (exp. 133mln). Q1 revenue seen between USD 117-119mln (exp. 117.4mln); FY revenue seen between USD 550-564mln (exp. 556.9mln).


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  Okta, Inc. (OKTA) - Q4 adj. EPS 0.30 (exp. 0.09), Q4 revenue USD 510mln (exp. 489.4mln). Q1 adj. EPS 0.11-0.12 (exp. 0.00), and sees Q1 revenue between USD 509-511mln (exp. 497.9mln). For the FY24, sees adj. EPS between 0.74-0.79 (exp. 0.32), and sees FY24 revenue between USD 2.155-2.17bln (exp. 2.16bln).


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  Pure Storage, Inc. (PSTG) - Q4 adj. EPS 0.53 (exp. 0.39), Q4 revenue USD 810.2mln (exp. 811.1mln). FY24 revenue growth seen in the mid- to high-single digits (exp. 13.5%).

COMMUNICATIONS:

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  Activision Blizzard, Inc. (ATVI), Microsoft Corporation (MSFT) - Activision has been accused by a union of illegally firing two video game testers for using strong language in a protest of a new company policy that limits remote work, Reuters reported. The case is the latest the CWA union has brought to the labour board as part of a campaign to unionise the firm and its subsidiaries, Reuters adds.


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  Radius Global Infrastructure, Inc. (RADI), EQT Corporation (EQT) - EQT's Active Core Infrastructure and Public Sector Pension Investment Board will indirectly acquire Radius for USD 15.00/shr in cash, representing a total enterprise value of approximately USD 3bln. The purchase price represents a premium of 28% over the unaffected closing price of Radius shares on February 24th.

CONSUMER:

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  Anheuser-Busch Inbev SA (BUD) - Topped profit expectations despite sales missing estimates, initiates FY23 outlook, sees 2023 organic adj. EBITDA +4-8% (exp. 7.6%).


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  Tesla (TSLA) - Shares slipped after hours, with analysts noting that its investor day was light on details about both new car models and its outlook. CFO said the automaker could spend up to USD 175bln to reach 20mln vehicle production, noted of possible share buyback as a use of excess capital. CEO confirmed it will build a new Gigafactory in Mexico; he said Tesla could have ten models to reach 20mln annual sales, but declined to comment when asked about future two vehicle models it indicated were planned. The chip shortages are mostly behind us. Global production head said the company hit 4mln production milestone. Tesla said battery storage business has grown +65% CAGR since 2016. Its next drive unit will take 50% smaller factory footprint, next-gen drive unit cost will be cut by USD 1,000 each, while next-gen drivetrain will not use rare earths.


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  Renault S.A. (RNLSY), Geely Automobile Holding (GELYY) - Saudi Aramco signed a letter of intent with Renault and Geely for a new powertrain company to focus on lower emission technologies.


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  American Eagle Outfitters, Inc. (AEO) - Q4 adj. EPS 0.37 (exp. 0.30), Q4 revenue USD 1.5bln (exp. 1.48bln). Exec said that entering 2023, brands were strong, inventory was healthy. "The global supply chain continues to normalise, providing improved costs and greater agility," and adds that "the company remains focused on reducing expenses." Given limited visibility into the macro environment, and overall consumer spending behavior, execs are taking a cautious view. Sees Q1 revenue flat to up low-single digits (exp. 1.1bln), and operating income approximately flat Y/Y. For the FY23, sees revenue flat to up low-single digits (exp. +3%, or 4.96bln), and FY23 operating income is seen betwen USD 270-310mln.


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  Frontdoor, Inc. (FTDR) - Q4 EPS 0.13 (exp. -0.11), Q4 revenue USD 339mln (exp. 333.3mln). Exec said 2022 was one of the most challenging macroeconomic environments this company has ever experienced. Sees Q1 revenue between USD 355-365mln (exp. 360mln), and sees FY revenue between USD 1.70-1.73bln (exp. 1.73bln).


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  Flutter Entertainment Plc ADR (PDYPY) - FY22 sales, EBITDA rise, while initial FY23 trading is in line with expectations.

FINANCIALS:

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  Silvergate Capital Corporation (SI) - In a filing, the 'crypto bank' said it was evaluating its ability to survive as a going concern, and it would not be able to file its annual report on time due to a further weakening in its capital position since last month, when it reported Q4 earnings.


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  M&G plc (MGPUF) - Macquarie is reportedly considering a GBP 5bln-plus takeover bid for M&G (MNG LN), Sky reports.

HEALTH CARE:

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  Veeva Systems Inc. (VEEV) - Q4 adj. EPS USD 1.15 (exp. 1.04), Q4 revenue USD 563.4mln (exp. 552.8mln). Sees Q1 adj. EPS between USD 0.79-0.80 (exp. 1.00), sees Q1 revenue between USD 514-516mln (exp. 552.3mln). FY24 adj. EPS is seen around USD 4.33 (exp. 4.46), and FY24 revenue seen between USD 2.35-2.36bln (exp. 2.4bln). FY25 revenue seen at least USD 2.8bln.


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  MERCK Kommanditgesellschaft auf Aktien (MRK GY) - German health care giant Merck (MRK GY) sees FY23 profits declining as COVID wanes.


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  GSK plc (GSK) - FDA committee voted unanimously that GSK's vaccine for the respiratory syncytial virus, Arexvy, is effective.

INDUSTRIALS:

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  Canadian National (CNI) - Saw a record February for Western Canadian grain movement on its network, moving more than 2.4mln metric tons of grain from Western Canada, exceeding the previous record set in February 2021 by over 200,000 metric tons. CN attributes February's performance to increased collaboration between supply chain partners, enabling strong performance through operational challenges, including periods of extreme cold.


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  Hapag-Lloyd AG (HPGLY) - Sees earnings 'normalising' in 2023 after record 2022 profits.

MATERIALS:

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  BASF SE (BASFY) - Said to be halting development of hybrid wheat seeds in North America, will instead focus on developing the new type of wheat in European markets.


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  CRH PLC (CRH) - Sales and profits top expectations, raises buyback, expects resilient demand and increased pricing in 2023.


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  Vallourec (VLOWY) - Sales and EBITDA top expectations, sees profits rising in FY23.


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  Covestro (COVTY) - Sees FY23 lower due to macro and geopolitical challenges.


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  Evonik Industries AG (EVKIY) - Swings to Q4 loss, sees weaker FY23 core profits amid price declines and macro woes.


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  Clariant AG (CLZNY) - Sees revenues declining in 2023.

ENERGY:

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  Technip Energies N.V. (THNPY) - Net profits were in line, order intake slips Y/Y, while backlog narrows.


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  Subsea 7 S.A. ADR (SUBCY) - Sees lower revenues and higher margins in FY23.

02 Mar 2023 - 09:31- Research Sheet- Source: Newsquawk