US EARLY MORNING: Equity futures start the week a little higher; debt ceiling commentary, Empire manufacturing, NAHB ahead

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  OVERNIGHT: APAC stocks started the week mostly higher, though some gains were capped in the absence of any major macro catalysts and as participants brace for this week’s key data (including activity data) and earnings. China’s PBoC maintained its MLF rates, which analysts took as a sign of confidence in the economy, helping lift the mood in some pockets; ING said this was an important signal that Q1 GDP data due Tuesday will not be too soft, although the Dutch bank does not expect it to be particularly strong either (see APAC wrap here). The European start was positive, albeit modest amid no major macro updates after the weekend. In stocks specifics, M&A was in focus amid a few notable deals (see our European opening note here).


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  US PRE-MARKETS: US equity futures have been traversing sideways through the overnight session and are just above neutral; Treasury yields are little changed, the Dollar Index is a little lower. Weekend news flow was thin; House Speaker McCarthy will speak at the NYSE today, and is expected to talk about the US debt limit – WaPo reported that he and other Republicans are moving toward a framework that could raise the debt ceiling into 2024, and allow for USD 2tln in spending. Elsewhere, US Treasury Secretary Yellen said bank credit tightening could be a substitute for further Fed rate hikes. Today’s session will see the release of some regional bank earnings, the NY Fed manufacturing survey, and the NAHB housing data, though traders may be more focussed on the other events for this week, including key data and earnings (see Day Ahead section below).


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  GROWTH FOCUS: Goldman Sachs notes that the recent stress in the US banking sector has heightened concerns around the path for growth going forwards, which triggered a shift among investors from focusing on inflation, to focusing on growth. “Peak inflation tends to bring relief across assets, especially equities, provided growth holds up,” GS told its clients, “cross-asset performance past the current peak in inflation suggests markets are generally less worried about growth risks this time and risks appear to be concentrated in pockets of the market more directly exposed to financial stability, liquidity or credit risks.” The bank notes that ‘real assets’ have suffered, and while these types of stocks can offer characteristics like inflation hedging, it has been looking for more defensive characteristics. Accordingly, the bank said it likes infrastructure, stable growth companies, short-dated TIPS and longs on intermediate-to-longer-dated breakevens. It added that from a more tactical perspective, it thinks that the reset in commodity prices may have gone too far relative to fundamentals.


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  EARNINGS SCORECARD: A week into earnings season, 93% of the 30 S&P 500 companies that reported Q1 metrics by the end of last week posted earnings above analyst estimates, according to Refinitiv data. In the highly watched financials sector, of the 7 firms that announced results, only one has missed earnings expectations. On the top-line, revenue updates have been a little more disappointing for the index, with only around two-thirds of S&P 500 firms thus far reporting sales upside relative to consensus (in the financials space, 57% report upside). And there is still some pessimism to navigate ahead: of the 112 S&P 500 companies that have made Q1 pre-announcements, just 23% have been positive, while 72% were outright negative relative to consensus expectations.

DAY AHEAD:

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


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  EUROPEAN DATA/SPEAKERS: The data slate is thin, with only final Italian inflation data for March due. On the speaker’s slate, ECB President Lagarde will speak on the theme of international economics, with a text to be released. BoE’s Cunliffe will speak at a global summit on innovation in finance, with a text to be released. On the supply front, the EU will sell EUR 2bln of 2029 and EUR 2bln of 20233 bonds; Germany, France and Netherlands will sell bills; BoE will conduct its medium-term Gilt sale operation.


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  NORTH AMERICAN DATA/SPEAKERS: The Empire Fed manufacturing report for April will help shape initial expectations of what the more widely followed ISM data will look like when it is released early May; the consensus expects the NY Fed gauge to improve at the headline level, but there will of course be a lot of focus on the sub-components too. On the housing front, the NAHB Housing Market Index for April will be released after the open. On the close, the monthly TIC flow data for February is due. Fed 2024 voter Barkin will speak at the Richmond Association for Business Economics; his remarks last week were a little more hawkish than expected, noting that although the peak of inflation was in the rear-view, there was still more work to do to bring inflation down. House Speaker McCarthy will speak at the NYSE on the Debt Limit; WaPo reported that he and other Republicans are moving toward a framework that could raise the debt ceiling into 2024, and allow for USD 2tln in spending.


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  US CORPORATE EARNINGS: Some of smaller banks will be reporting today, with M&T Bank Corp. (MTB), Charles Schwab (SCHW), and State Street (STT) on deck; our full earnings expectation sheet can be accessed here. Notable companies reporting this week include: JNJ, BAC, GS, LMT, PLD, NFLX on Tuesday; ASML, ELV, ABT, MS, TSLA, IBM on Wednesday; BX, TSM, T, PM, AXP, UNP on Thursday; PG on Friday; our full Weekly US Earnings Estimates can be accessed here.


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  ENERGY: WTI May 2023 options expire.


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  WEEK AHEAD: The week ahead includes CPI data from Canada, Japan, NZ, UK; PBoC LPR, China activity data; Minutes from the ECB, RBA. Our week ahead preview can be accessed here.

EQUITY NEWS:

TECH:

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  Alphabet Inc. (GOOG), Microsoft Corporation (MSFT) - Google’s employees learned in March that the South Korean consumer electronics giant Samsung was considering replacing Google with Microsoft’s Bing as the default search engine on its devices, NYT reports.


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  Apple Inc. (AAPL) - Apple’s June Worldwide Developers Conference is shaping up to be one of its biggest product launch events ever, Bloomberg reports, and not just because of the long-awaited mixed-reality headset, but also new Mac laptops and the biggest update to the Apple Watch’s software since the first version was introduced in 2015. Bloomberg also reports that Apple is ramping up testing of fresh Macs with processors on par with the current M2 chip, making headway on key new machines that could help reverse a sales decline. Elsewhere, Apple’s sales in India reportedly rose to almost USD 6bln in the past year, Bloomberg said.


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  AI - Elon Musk is developing plans to launch a new AI start-up to compete with ChatGPT-maker OpenAI, as he seeks to join Silicon Valley’s race to build generative AI systems, FT reports. Musk is reportedly assembling a team of AI researchers and engineers, and is in discussions with a number of investors in SpaceX and Tesla about putting money into his new venture.


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  Panasonic Holdings Corp. (PCRFY) - Tesla battery supplier Panasonic Holdings is considering building a battery plant in Oklahoma, its third in the US, Reuters reports.


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  Network International Holdings plc (NWITY) - An investor group backed by CVC Capital Partners is in advanced talks to acquire Middle Eastern credit card processor Network International Holdings Plc for at least GBP 2bln, Bloomberg reports.

COMMUNICATIONS:

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  Manchester United plc (MANU), Carlyle Group (CG) - Private equity firm Carlyle Group is in talks about a major investment in the world’s greatest football club Manchester United as the auction of the Premier League side nears its concluding stages, Sky News reports. Carlyle is among a handful of parties which have pitched proposals to acquire a minority stake. Elsewhere, the two final bidders for MANU are under pressure to prove they can actually complete a deal should one be struck, with the club’s owners seeking higher offers in the next and final round of the process, FT reports; the Glazers are inviting higher offers from Sir Jim Ratcliffe and Sheikh Jassim bin Hamad al-Thani.


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  TikTok - Politico reports that although President Biden and the US Congress want to ban TikTok, that may prove impossible at this point. But now lawmakers, legal and national security experts, as well as former officials in two administrations, have suggested that a ban may simply face too many hurdles to ever work.


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  Comcast (CMCSA) - The Super Mario Bros. Movie has jumped to another domestic weekend box office victory with USD 87mln, bringing its North American total to USD 347.8mln, and its global total to UDS 677.96mln after two weekends, IGN reports.


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  Sega Sammy Holdings Inc. (SGAMY), Rovio Entertainment Oyj (ROVIO HE) - Sega Sammy Holdings is nearing a deal to acquire Rovio Entertainment Oyj for about USD 1bln, WSJ reports. A deal could be sealed early this week.

MATERIALS:

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  Teck Resources Limited (TECK), Glencore Plc (GLNCY), Anglo American (NGLOY), Vale (VALE), Freeport McMoRan (FCX) - Teck Resources board is under increasing pressure to open talks with Glencore over a USD 23bln takeover; shareholder advisory group Glass Lewis joins ISS in calling for Teck’s shareholders to reject its own split, which goes to a vote on April 26th, The Times reports. Glass Lewis said Glencore’s offer was a reasonably compelling strategic alternative that warrants the company hitting the pause button on the separation and engaging in further discussions. Meanwhile, Bloomberg reports that hedge fund Greenlight Capital supports Teck Resources’ plan to split itself up over Glencore’s proposed takeover, which it says doesn’t offer a compelling premium. Teck Resources (TECK) has reportedly been approached by Anglo American (NGLOY), Vale (VALE), and Freeport McMoRan (FCX), among others, to explore deals for its base metals business if Teck goes ahead with the split, Reuters said.

ENERGY:

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  Exxon Mobil Corporation (XOM) - WSJ notes that Exxon CEO’s pay jumped +52% amid rising oil prices and record profits; his compensation includes stock awards of USD 24.9mln and a nearly USD 6.4mln bonus.

INDUSTRIALS:

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  FedEx Corporation (FDX) - Union leaders representing Federal Express pilots said they will seek authority from members to call a strike when legally permissible, but no imminent work action can happen because the federally controlled negotiating process still has a long way to go, Freight Waves reports.


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  Ferguson plc (FERG) - Positive mention in Barron’s for the largest plumbing and HVAC distributor in the US; the article said the stock was a buy amid speculation it could join the S&P 500 index.

FINANCIALS:

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  PacWest Bancorp (PACW) - Fitch Ratings downgrades PacWest Bancorp to ‘BB+’; removed from Rating Watch Negative. Fitch said its rating action reflects a deterioration in PACW’s Funding and Liquidity profile in the wake of market disruptions following the failure of Silicon Valley Bank. Moreover, this action reflects PACWs greater reliance on non-core funding, which will negatively impact earnings and profitability, which Fitch had previously viewed as supportive of PACWs credit profile. While near-term liquidity challenges appear to have abated, the Negative Rating Outlook reflects a still fragile view for funding and liquidity.


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  UBS Group AG (UBS), Credit Suisse Group AG (CS) - Federal Reserve Board announces its approval for UBS Group AG to acquire the US subsidiaries of Credit Suisse Group AG.


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  Hedge Funds - US regulator calls for greater scrutiny of hedge funds after bond turmoil. SEC chair said ‘once in a generation volatility’ highlights risks from shadow banking sector.


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  Life Insurance - Positive mention in Barron’s; said stocks in the sector were cheap, and have good values, while companies’ finances are sound as the industry has gotten better at risk management. Life insurers mentioned in the article include: Corebridge Financial (CRBG), Equitable Holdings (EQH), Globe Life (GL), Primerica (PRI), Reinsurance Group of America (RGA), Unum Group (UNM), Voya Financial (VOYA).


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  Aon plc (AON) - Board authorised +10% increase to quarterly cash dividend, to USD 0.615/shr (prev. 0.56/shr).

HEALTH CARE:

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  AstraZeneca PLC (AZN) - AstraZeneca presents results from AEGEAN Phase III trial; IMFINZI in combination with neoadjuvant chemotherapy before surgery and as adjuvant monotherapy after surgery led to a statistically significant and clinically meaningful improvement in event-free survival versus neoadjuvant chemotherapy alone followed by surgery for patients with resectable early-stage non-small cell lung cancer.


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  AbbVie Inc. (ABBV) - AbbVie has revealed that the EU Commission has approved its therapy, Rinvoq for the treatment of moderately to severe active Crohn’s Disease. Separately, AbbVie’s CoolSculpting received a negative mention in the NYT, said it is among the most popular fixes for unwanted bulges, but risks of a serious side effect appears to be higher than previously known.


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  Gilead Sciences, Inc. (GILD) - A Phase 3 clinical study demonstrated that Veklury, or remdesivir, was generally well tolerated in people with moderate to severe renal impairment.


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  GSK plc (GSK) - EAGLE-2 and EAGLE-3 phase III trials met primary endpoints.


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  Incyte Corporation (INCY), MorphoSys AG (MOR) - MorphoSys and Incyte announce five-year follow-up data from its Phase 2 L-MIND study; showed that Monjuvi plus lenalidomide followed by Monjuvi monotherapy provided prolonged, durable responses in adult patients with relapsed or refractory diffuse large B-cell lymphoma.


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  LivaNova PLC (LIVN) - CEO Damien McDonald resigns, effective immediately; William Kozy named interim CEO. Kozy will continue as Chair. LivaNova reported preliminary Q1 revenues +9% Y/Y at USD 263mln (exp. 243.2mln).


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  Merck & Co., Inc. (MRK), Moderna, Inc. (MRNA) - Merck and Moderna announce results from Phase 2b KEYNOTE-942/mRNA-4157-P201 trial; in the overall intention-to-treat population, adjuvant treatment with mRNA-4157 in combination with KEYTRUDA demonstrated a statistically significant and clinically meaningful improvement in recurrence-free survival, and reduced the risk of recurrence or death by 44% compared with KEYTRUDA alone.


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  Merck & Co., Inc. (MRK), Prometheus Biosciences, Inc. (RXDX) - Merck acquires clinical-stage biotechnology company Prometheus Biosciences for USD 200.00/shr (vs close of 114.01 on Friday), for a total equity value of approximately USD 10.8bln. The closing of the proposed transaction will be subject to certain conditions, and is expected to close in Q3 2023.


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  Roche Holding AG (RHHBY) - Genentech announces data from Phase III IMbrave050 study, shows Tecentriq plus Avastin demonstrated a statistically significant improvement in recurrence-free survival in people with hepatocellular carcinoma at high risk of disease recurrence following liver resection or ablation with curative intent.

CONSUMER CYCLICAL:

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  XPeng Inc. (XPEV) - The electric vehicle maker unveiled a new platform it developed in-house for making vehicles, which it says will reduce the development and manufacturing costs for its company’s upcoming models by helping to reduce costs of powertrain systems including batteries by 25%, and those of intelligent driving system by 50% by the end of 2024.

CONSUMER STAPLES:

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  Walmart Inc. (WMT) - Walmart is shuffling the leadership of its merchandising ranks, WSJ reports, a shift as it works to navigate an unpredictable consumer landscape. Charles Redfield, who became chief merchandising officer last year, will leave the role May 1st.

17 Apr 2023 - 09:30- EquitiesData- Source: Newsquawk