US EARLY MORNING: Equity futures start the month higher; ISM data ahead

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  OVERNIGHT: On Wall Street, stocks were choppy Tuesday after soft US data, hot Spanish and French inflation data, and month-end flows all at play; there was a sizeable sell-side market imbalance into the close, which saw the major indices close in the red (see here). APAC stocks were mostly positive as the region digested a slew of data releases (see here). From Australia, we saw weaker GDP growth and softer CPI; Westpac said that growth disappointed as domestic demand stalls amid high inflation and higher interest rates, while the downside surprise in CPI suggested that the inflationary pulse may be starting to ease. In China, the Manufacturing PMI saw its fastest pace of expansion in over a decade; Capital Economics said the data was exceptionally strong, and consistent with expectations for a rapid near-term rebound in Chinese economic activity. European equities have started the midweek session on a mildly constructive footing, supported by the China PMI data (see here), but the risk mood became a bit more neutral ahead of German inflation metrics, which we touch on in the section below.


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  US PRE-MARKETS: US index futures are starting the new month with slight gains, while yields are rising along the curve by 1-6bps (short-end leads the upside in yields); there may be some sympathy with EGBs in play, after initial German regional inflation data released came in on the hot side, much like the French and Spanish data for the month, which could suggest upside risks vs consensus for today’s German inflation data, as well as tomorrow’s Eurozone release. The Dollar Index is not tracking yields higher, however, as the EUR rises on the spectre of more hawkish ECB policy ahead. Crude futures are higher, likely supported by the solid China PMI data, rather than the larger-than-expected build reported by the API afterhours on Tuesday. Traders are gearing up for the key ISM manufacturing data due later today, which we preview in the section below.

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: After prelim February inflation data for France and Spain came in hot relative to expectations, traders will be eying the German equivalents, ahead of the aggregate Eurozone flash HICP data (due Thursday); the rate of both German CPI and HICP are expected to moderate but remain elevated (HICP seen at 9.0% Y/Y from 9.2%). Final PMI manufacturing PMI data will be released over the course of the morning. BoE’s monthly credit stats are on the docket; BoE Governor Bailey will also be speaking today, and his speech will focus on the cost of living crisis.


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  US DATA/SPEAKERS: The ISM manufacturing survey for February is expected to show some improvement, but the headline is still likely to remain under the 50-mark (a more in depth preview is provided below); ahead of the ISM data, S&P Global’s final US manufacturing PMI for Feb will be released, providing a convenient preview for the ISM. Fed voter Kashkari will be speaking before the open.


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  ENERGY: The DoE weekly energy inventories are due; after hours Tuesday, the API reported crude stocks +6.2mln in the week (exp. +0.5mln), Cushing +0.5mln, gasoline -1.8mln (exp. +0.5mln), distillates -0.3mln (exp. -0.5mln).


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  SUPPLY: Germany will auction EUR 2.5bln of 2039 and 2038 Bunds. The UK will sell GBP 3.5bln of 2038 Gilts. Our full G7 bonds auction note can be accessed here.
  


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  US CORPORATE EARNINGS: Major US corporates reporting today include LOW and CRM; our daily estimates sheet can be accessed here. TSLA is hosting its investor day today, where it is expected to provide details about its cheaper, USD 25k vehicle.


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  GERMAN INFLATION (13:00GMT/08:00EST): The headline is expected to cool to 9.0% Y/Y from 9.2% previously, but so far, the regional releases suggest some upside risk, and are in keeping with the French and Spanish themes, tilting towards hotter price pressures; Bunds came under pressure after North Rhine-Westphalia reported annual CPI rising to 8.5% Y/Y from 8.3% in the state, casting some doubt over the consensus view for the national data. Banks have recently been revising up their estimates of how aggressive the ECB will be; Goldman Sachs Tuesday told its clients that it now sees a fourth 50bps rate rise in May (previously it was expecting +25bps), and now sees rates peaking at 3.75% in June (previously it was modelling 3.5%); the bank said it changed its view after comments from ECB chief economist Lane suggested inflation risks remained to the upside, while policy transmission may well be slower during this cycle, signalling more openness towards a further 50bps in May and a higher peak rate than in previous comments. GS adds that the data received this week have been firmer than expected, including the upside surprise in the Spanish and French inflation numbers, and re-acceleration in Euro area bank lending in January. The central bank's meeting minutes are due on Thursday (there is also flash inflation data out on Thursday, which could overshadow the minutes).


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  PREVIEW – ISM MANUFACTURING (15:00GMT/10:00EST): The consensus is for the manufacturing ISM to improve a touch to 47.8 in February vs 47.4 in January. Credit Suisse is against that consensus view, and sees the index slipping to 47.0; the bank writes that although “momentum in the manufacturing sector is improving, the ISM has been a positive outlier, and likely has further room to fall before a modest rebound in the spring.” The bank notes that the S&P Global PMI data series and several Fed regional manufacturing surveys have stabilised recently, but the headline ISM will still be dragged lower by the production, employment and supplier delivery components. Ahead, the bank is more optimistic, and looks for the new orders component to bounce off the post-pandemic low of 42.5 seen in the January data. “US industrial production momentum is currently at a deep trough, and we expect a rebound in the months ahead,” CS writes, “some improvement in ISM new orders is likely this month, followed by a broader stabilisation in manufacturing surveys.” That said, it expects growth will remain sub-trend, with tighter financial conditions and poor sentiment limiting demand, and adds that elevated inventories will be a headwind for manufacturers.

STOCK SPECIFIC NEWS:

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  Agilent Technologies Inc (A) - Q1 EPS 1.37 (exp. 1.30), Q1 revenue USD 1.76bln (exp. 1.70bln). Q2 EPS seen between 1.24-1.27 (exp. 1.27). Raises FY guidance, sees FY revenue between USD 7.03bln-7.10bln (exp. 7.01bln), and lifts FY EPS view to between USD 5.65-5.70 from 5.61-5.69.


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  Airbus (EADSY) - CEO sees global demand for freighters, even after the pandemic.


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  Allfunds (ALLFG), Euronext (ERNXY) - Euronext withdraws its indicative takeover offer for Allfunds.


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  Ambarella, Inc. (AMBA) - Q4 adj. EPS 0.23 (exp. 0.14), Q4 revenue USD 83.3mln (exp. 83mln). Said itachieved significant milestones in FY23 towards its transformation to an edge AI company. Exec added that customers have indicated end market demand is healthy, but it is experiencing a more pronounced slowdown as customers reduce inventory. Sees Q1 revenue to be well below end market consumption, and it currently does not expect these existing cyclical factors to cause future quarter revenue to decline below Q1 guidance. Sees Q1 revenue between USD 60-64mln (exp. 77.1mln).


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  AMC Entertainment Holdings, Inc. (AMC) - Q4 adjusted EPS -0.14 (exp. -0.21), Q4 revenue USD 990.9mln (exp. 977.7mln); had available liquidity of USD 842.7mln at the end of the quarter, including USD 211.2mln of undrawn capacity under a revolving credit facility. Exec said Q4 revenue per patron was USD 19.98, well above pre-pandemic levels, due to rising ticket prices and the consumer's continued predilection to indulge more at its concession stands in its high-margin food and beverage business. Expects recovery to continue apace in 2023 as Hollywood is expected to release approximately 75% more major movie titles than it did in 2022.


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  Axon Enterprise, Inc. (AXON) - Q4 adj. EPS 0.70 (exp. 0.51), Q4 revenue USD 336mln (exp. 305.9mln). FY23 revenue seen 'at least' USD 1.43bln (exp. 1.38bln), and targets FY23 adj. EBITDA margin of 20%, sees FY23 CapEx between USD 50-65mln. Targets 2025 revenue of 'at least' USD 2bln, which would reflect a 20%+ top-line annual growth rate.


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  Bayer (BAYRY) - Has submitted Aflibercept 8 MG for marketing authorisation within Japan.


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  BNP Paribas (BNPQY) - Belgium's SFPI-FPIM plans to sell 33.3mln shares (~2.7% stake) BNP Paribas shares at EUR 64.96 (vs EUR 66.15 close on Tuesday).


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  Boeing Company (BA) - Was awarded a USD 1.2bln Air Force contract.


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  Chevron (CVX) - CEO said the oil major will continue to buyback shares through oil cycles, CNBC reports.


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  Duolingo, Inc. (DUOL) - Q4 EPS -0.35 (exp. -0.53), Q4 revenue USD 103.8mln (exp. 99.9mln), Q4 paid subscribers +67% Y/Y at 4.2mln, Q4 monthly active users +43% Y/Y to 60.7mln, Q4 daily active users +62% to 16.3mln. Sees Q1 revenue between USD 111-114mln (exp. 106.1mln), and sees FY23 revenue between USD 530-542mln (exp. 464.5mln).


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  Endeavor Group Holdings, Inc. (EDR) - Q4 EPS -0.72 (vs -0.07 Y/Y), Q4 revenue USD 1.26bln (exp. 1.2bln). Exec said business was resilient despite ongoing macroeconomic headwinds. Sees FY23 revenue between USD USD 5.825-5.975bln (exp. 5.81bln).


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  Equinor (EQNR NO) - To acquire equity interest in five discoveries in Troll, Fram and Kvitebjordn area.


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  First Solar Inc (FSLR) - Q4 2022 EPS -0.07 (exp. -0.16), Q4 revenue USD 1.00bln (exp. 0.99bln). Sees FY EPS between USD 7.00-8.00 per diluted share, and sees FY net sales between USD 3.4bln-3.6bln (exp. 3.24bln).


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  Ford Motor Company (F) - US Postal Service will purchase more than 9,000 Ford battery-powered delivery vans, part of a USD 10bln push to electrify its aging fleet, Bloomberg waffled.


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  General Motors (GM) - The automaker is cutting several hundred salaried jobs, with most in the US, as it looks to launch several new EVs this year in a bid to gain new market share, according to Detroit Free Press. GM also plans to cut USD 2bln of costs over the next two years. Separately, GM is cutting hundreds of executive-level and salaried jobs as it looks to cut costs and streamline operations, Reuters reports. Exec said it was committed to USD 2bln in cost savings over the next two years, which it will find by reducing corporate expenses, overhead, and complexity in all our products.


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  Glencore (GLNCY) - A US judge ordered Glencore to pay USD 700mln after guilty plea over a scheme to bribe foreign officials.


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  HP Inc (HPQ) - Q1 adj. EPS 0.75 (exp. 0.74), Q1 revenue USD 13.8bln (exp. 14.12bln), Q1 operating margin 7.8% (exp. 7.1%). Q1 PC revenue -24% to USD 9.2bln (exp. 9.65bln), Q1 Printing revenue USD 4.61bln (exp. 4.48bln). Sees Q2 adj. EPS between USD 0.73-0.83 (exp. 0.76), and sees FY EPS between USD 3.20-3.60 (exp. 3.29). Continues to see FY FCF between USD 3.0bln-3.5bln (exp. 3.09bln). Exec said it was not expecting a significant economic recovery in FY23; expects currency headwinds of around 3% Y/Y, sees overall PC market TAM to decline by high-teens percentage FY23.


• Moncler (MONRY) - Annual sales rose 25%, topping expectations; hiked prices 10% in Winter season, saw not adverse demand hit.


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  Monster Beverage Corp (MNST) - Q4 EPS 0.57 (exp. 0.63), Q4 revenue USD 1.51bln (exp. 1.6bln), Q4 average net sales -3.7% Y/Y at USD 8.91 per case (exp. 9.37). Exec noted certain supply chain pressures were moderating; says FX was a headwind in Q4; says there will be further price hikes in H1 23. Declares a 2-for-1 stock split.


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  Novavax (NVAX) - Said it has substantial doubts on continuing as going concern. Exec said that while its current cash flow forecast for the one-year going concern look forward period estimates that it has sufficient capital available to fund operations, this forecast is subject to significant uncertainty, including as it relates to 2023 revenue, funding from the US government, and pending arbitration. Given these uncertainties, substantial doubt exists regarding its ability to continue as a going concern through one year from the date that these financial statements are issued.


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  NVIDIA Corporation (NVDA) - The semiconductor files for mixed shelf of up to USD 10bln, according to SEC filing.


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  Porsche (P911 GY) - To recall 51k Panamera models in China due to risk of electrical short-circuits and fire.


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  Puma (PUMSY) - Q4 earnings above expectations, sees FY23 profits are last year's levels amid costs.


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  Regeneron Pharmaceuticals (REGN), Sanofi (SNY) - FDA approves Regeneron and Sanofi's Kevzara (sarilumab) for the treatment of polymyalgia rheumatica.


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  Rivian Automotive Inc (RIVN) - Q4 EPS -1.73 (exp. -1.94), Q4 revenue USD 663mln (exp. 714mln), Q4 EBITDA USD -1.446bln (exp. -1.557bln). Q4 deliveries 8,054 (exp. 8,833). Q4 vehicle production 10,020 (exp. 10,423); for FY23, sees production at 50k vehicles (exp. 62,797). Sees FY23 EBITDA at USD -4.3bln (exp. -4.1bln).


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  Rocket Companies, Inc. (RKT) - Q4 adj. EPS -0.10 (exp. -0.11), Q4 adj. revenue USD 683mln (exp. 682.7mln). Q4 production USD 19bln (vs 75.8bln Y/Y). Sees Q1 adj. revenue between USD 700-850mln (exp. 805.8mln).


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  Rogers Corporation (ROG) - Q4 adj. EPS 1.04 (vs 1.92 Y/Y), Q4 revenue USD 223.7mln (vs 230.5mln Y/Y). Sees Q1 EPS between USD 0.65-0.85, and revenue of USD 230-240mln.


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  Ross Stores Inc (ROST) - Q4 EPS USD 1.31 (exp. 1.24), Q4 revenue USD 5.21bln (exp. 5.17bln), Q4 comp sales +1.0% (exp. -1.0%), Q4 merchandise inventories -11% Y/Y at USD 2.02bln (exp. 2.36bln). Boosts quarterly dividend +8%. Sees Q1 EPS of 1.02 (exp. 1.19), and sees FY EPS between 4.65-4.95 (exp. 5.07).


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  Saipem (SAPMY) - Awarded a USD 400mln offshore drilling contract.


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  Sarepta Therapeutics, Inc. (SRPT) - Q4 EPS -1.24 (exp. -1.35), Q4 revenue USD 258.43mln (exp. 248.3mln).


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  Urban Outfitters, Inc. (URBN) - Q4 EPS 0.34 (exp. 0.38), Q4 revenue USD 1.38bln (exp. 1.37bln). Q1 comps +3% (exp. +2.25%). Exec said it enters Spring with an improved inventory position, bodes well for merchandise margin opportunity in FY24. Sees Q1 revenue growth at similar levels to Q4. Exec said overall consumer demand remained strong to start the quarter, believes strength will continue throughout Q1. Q1 total company sales growth could be similar to Q4 levels, could result from a doubling of Nuuly segment year, and Retail segment comp sales growing low single digit. Growth in the Retail segment and Nuuly segments is likely to be partially offset by sales decline in our Wholesale segment.


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  Verisk Analytics, Inc. (VRSK) - Q4 adj. EPS 1.43 (exp. 1.18), Q4 revenue USD 630.4mln (exp. 616.4mln). Board approved +9.7% increase in its cash dividend to 0.34/shr.

01 Mar 2023 - 09:31- Fixed IncomeData- Source: Newsquawk