US EARLY MORNING: Equity index futures are trading flat ahead of US CPI data due today

US PRE-MARKETS: US equity futures are trading around unchanged levels, while Treasury yields are higher by 2-3bps across the curve; the Dollar Index is flat. Markets are trading in a tentative fashion ahead of the US CPI data for August, where the headline rate of annual inflation is likely to tick up on energy effects, while the core rate of inflation is seen easing on an annual basis (see below for our primer). Markets currently expect the FOMC will hold rates at 5.25-5.50% next week, but there are some scenarios where pricing for a hike might increase, analysts say. This could also manifest itself in November pricing, where the probability for a hike is currently priced at around 50/50. Further out, markets are fully discounting the first Fed rate cut by July 2024.

PREVIEW - US CPI (13:30BST/08:30EDT): Headline inflation is expected to rise 0.6% M/M in August, picking up in pace versus the 0.2% M/M printed in July; the annual headline is expected to rise to 3.6% Y/Y from 3.2%. The core rate is seen up 0.2% M/M, matching the prior month; the annual core rate is seen easing to 4.3% Y/Y from 4.7%. Higher energy prices are likely to drive the headline up, but the core rate is seen steady. "While inflation will continue to moderate, the path to 2% price growth will be slow and rocky," Moody's writes, "the ongoing decline in used-vehicle prices will provide some downward pressure, but the biggest shoe yet to drop is related to housing and rent prices, where weakness from late 2022 has yet to show up in the CPI." Fed officials have recently been striking a balanced approach to guiding policy, welcoming the progress already made in bringing price pressures down, but noting that there is still further to go, while generally caveating their policy views around incoming data. From the market's perspective, the FOMC has already reached its terminal rate, and instead, the focus appears to be on when the central bank will begin to cut rates. Recent data releases have seen the timing swing towards May when the data has been weak, and out to July when data has been strong; the CPI data is likely to continue this pattern. (Full Newsquawk primer here)

TODAY’S AGENDA:

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  EUROPEAN DAY AHEAD: The docket is thin, with only Eurozone industrial production of note (expected to slip in July). On the supply front, Italy will sell EUR 8-9.75bln of 2026, 2030, 2053, and 2040 BTPs; Germany will sell EUR 1.5bln of 2053 and EUR 1bln and 2052 debt; the UK will sell GBP 3.75bln of 2033 Gilts.


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  US DAY AHEAD: The key release is the CPI data for August, which is expected to show headline consumer prices rising on an annual basis (consensus looks for 3.6% Y/Y from 3.2%), although the rate of core inflation is seen easing to 4.3% from 4.7% (see below). The morning will see the release of the weekly MBA mortgage applications data. On the supply front, the Treasury will conclude this week's notes and bonds sales with an auction of USD 20bln in 30yr Bonds.


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  PREVIEW - US CPI (13:30BST/08:30EDT): Headline inflation is expected to rise 0.6% M/M in August, picking up in pace versus the 0.2% M/M printed in July; the annual headline is expected to rise to 3.6% Y/Y from 3.2%. The core rate is seen up 0.2% M/M, matching the prior month; the annual core rate is seen easing to 4.3% Y/Y from 4.7%. Higher energy prices are likely to drive the headline up, but the core rate is seen steady. "While inflation will continue to moderate, the path to 2% price growth will be slow and rocky," Moody's writes, "the ongoing decline in used-vehicle prices will provide some downward pressure, but the biggest shoe yet to drop is related to housing and rent prices, where weakness from late 2022 has yet to show up in the CPI." Fed officials have recently been striking a balanced approach to guiding policy, welcoming the progress already made in bringing price pressures down, but noting that there is still further to go, while generally caveating their policy views around incoming data. From the market's perspective, the FOMC has already reached its terminal rate, and instead, the focus appears to be on when the central bank will begin to cut rates. Recent data releases have seen the timing swing towards May when the data has been weak, and out to July when data has been strong; the CPI data is likely to continue this pattern. (Full Newsquawk primer here)


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  ENERGY: The IEA Oil Market Report will be released in the European morning; as a reference, the EIA STEO raised 2023 forecast for world oil demand growth by 50k BPD, now sees 1.81mln BPD Y/Y increase, but cut its 2024 world oil demand growth view by 250k BPD, now sees 1.36mln BPD Y/Y increase. The DoE will release its gauge of energy inventories; for reference, the API data reportedly showed Crude stocks building +1.2mln (exp. -1.9mln), though Cushing stocks drew down by -2.4mln; gasoline building +4.2mln (exp. +0.2mln), distillate building +2.6mln (exp. +1.3mln).


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  UK GDP: UK GDP Estimate for July printed -0.5% M/M (exp. -0.2, prev. 0.50%), the first month since June 2022 that all three sectors contributed negatively to GDP in the month. Capital Economics said that the data suggests that underlying growth has lost momentum. While some of the weakness was due to there being almost twice as many working days lost to strikes in July than in June, and unusually wet weather also played a part, CapEco says that with output declining in 11 of the other 16 sectors, there is an air of underlying weakness. "That would make sense given that the dampening effect of higher interest rates should be starting to be felt a bit harder now and when other indicators, such as the activity PMIs which exclude the drag on public sector activity from strikes, are also pointing to recession." Its economist say that GDP growth in Q3 is likely to fall well short of the BoE's +0.4% Q/Q forecast; "even so, the strength of wage growth and the stickiness of core inflation suggests to us the Bank will pull the interest rate trigger once more at the policy meeting next Thursday."

EQUITY NEWS:

TECH:

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  Apple (AAPL) - Apple has lowered the prices for its iPhone 14 series in China following the launch of the iPhone 15 lineup, Reuters reports. Prices for the 128gb version of iPhone 14 was cut by CNY 600 to CNY 5,399, while the iPhone 14 Plus is selling at CNY 5,999, down from CNY 6,999 at launch.


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  Arm Holdings (ARM), SoftBank (SFTBY) - SoftBank's Arm Holdings unit will price its IPO at USD 51/shr, according to sources cited by Reuters, the top end of its indicated USD 47-51 range after the IPO received enough backing from investors, and would command a USD 54.5bln valuation on a fully diluted basis.


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  Salesforce (CRM) - Chairman Marc Benioff sold 15k shares at USD 224.81/shr on September 11th for a total USD 3.37mln.

COMMUNICATIONS:

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  Manchester United (MANU), Qualcomm (QCOM) - The world's greatest football club Manchester United is partnering with Qualcomm to display the Snapdragon brand on the front of their iconic kits starting from the 2024-25 season. Qualcomm is already a global partner of the club.


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  T-Mobile (TMUS), Comcast (CMCSA) - T-Mobile is buying airwaves from Comcast for USD 1.2-3.3bln, Bloomberg reported, to improve its wireless service in cities like New York, Orlando, and Kansas City. These airwaves are good for covering large areas and can go through walls. The deal should close by 2028, pending approval from the FCC. Comcast is selling them because it doesn't need them, as it uses different airwaves. The stock prices of both companies didn't change much in response to the news.

CONSUMER:

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  Inditex (IDEXY) - The world's biggest fashion company posted a 40% rise in profits in H1 as price rises slow, and it attracted buyers with online promotions. H1 EBIT EUR 3.16bln (exp. 3.13bln), revenue EUR 16.9bln (prev. 14.9bln Y/Y). Notes Aug 1st to September 11th Revenue +14%.


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  Apple (AAPL) - At its product event on Tuesday, it said that the response to its Vision Pro has been amazing and it is on track to ship the Vision Pro early next year, while it announced its Apple Watch Series 9. Furthermore, it also announced the iPhone 15 and iPhone 15 Pro with iPhone 15 price to start at USD 799 and the Plus at USD 899, while the iPhone Pro starts at USD 999 and Pro Max at USD 1,199.


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  Amazon (AMZN) - Amazon is increasing the pay for its contract delivery drivers as part of a USD 440mln investment in its delivery service partner programme, CNBC reports. While the exact size of the raise was not specifyied, Amazon expects the average delivery driver to earn at least USD 20.50/hr + benefits.


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  BMW (BMWYY), Ford (F), Honda (HMC) - Honda, BMW, and Ford are teaming up to create a JV called ChargeScape, Nikkei reports. They'll work with power companies to improve electric vehicle charging in North America. This platform will help drivers find the best times to charge, while utilities ensure a stable power supply. Operations start in 2024 pending approvals.


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  General Motors (GM) - UBS upgraded GM to a "Buy" from "Neutral", raised PT to USD 44 from 41; believes that if there's no labour strike, GM's earnings in H2 could exceed expectations, and the current negative sentiment around the stock makes it an attractive investment.


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  Birkenstock - German sandal maker Birkenstock is planning to IPO in New York, signaling a revival in the US market for IPOs after a downturn, FT reports. The company aims for a valuation of over USD 8bln and is expected to list in early October. Its owner, L Catterton, plans to launch the IPO around October 9th, following recent high-profile deals like Arm and Instacart.


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  Jack in the Box (JACK) - Named Tom Rose as new Del Taco President.


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  Alibaba (BABA) - Asian Games in China's Hangzou picks Alibaba as cloud service provider; BABA will support 56 competition venues, company said.

ENERGY:

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  BP (BP) - CEO Bernard Looney has resigned because he didn't fully disclose past personal relationships with colleagues, FT reports. CFO Murray Auchincloss will take over as interim CEO.


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  Tullow (TUWOY) - H1 Net USD 217mln (prev. 561mln Y/Y), Revenue USD 776.9mln (exp. 800mln). FY oil production guidance narrowed to 58-60k BOPD (prev. 58-64k), additional 7k BOEPD of gas production expected from Ghana. FY Capex guidance maintained.


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  Shell (SHEL) - Intends to increase oil production by 5k BPD in the Vaca Muerta, Argentina shale formation.

INDUSTRIALS:

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  Fastenal (FAST) - Fastenal is partnering with ZEVX to convert some of its pickup trucks to EVs. They're conducting a trial in six states, aiming to electrify up to 16 trucks in 2023.


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  Rocket Lab (RKLB), Leidos (LDOS) - Rocket Lab signed a contract with Leidos to conduct four HASTE missions, which will take place in 2024 and 2025. The goal is to provide hypersonic test launch capabilities as part of the MACH-TB project awarded by the Naval Surface Warfare Center.


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  Lockheed Martin (LMT) - Was awarded a USD 841.5M Navy contract modification, and a USD 312mln Army contract.


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  Northrop Grumman (NOC) - Was awarded a USD 458.2mln Navy ordering agreement.


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  RTX (RTX) - Was awarded a USD 418.3mln Army contract agreement.


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  BAE Systems (BAESY) - To develop night-vision helmets for Royal Air Force pilots, after being awarded a GBP 40mln contract, according to Bloomberg.


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  Airbus (EADSY) - CEO says demand for wide bodied airplanes is greater; demand for planes in China still very strong; 'on road' to building 30 jets/month in North America, according to CNBC.

MATERIALS:

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  Mosaic (MOS) - Mosaic reports July-August Potash revenue of USD 489mln (vs 967mln Y/Y), volume 1.48mln tonnes (vs 1.43mln Y/Y). July-August Phosphates sales USD 642mln (vs 966mln Y/Y), volume 1.08mln tonnes (vs 0.98mln Y/Y).

FINANCIALS:

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  Franklin Resources (BEN) - End-August AUM USD 1.42tln (prev. 1.45tln at end-July), reflecting the impact of negative markets and modest long-term net outflows.


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  AllianceBernstein (AB) - End-August AUM USD 694bln (prev. USD 704bln at end-July); AB said positive net inflows across all three channels were offset by market depreciation, resulting in a 1.4% AUM decline.


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  Invesco (IVZ) - End-August AUM USD 1.53tln (-2.7% M/M), while net long-term flows broke even in the month.


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  Virtu Financial (VIRT) - Virtu Financial provided an update on its SEC investigation, said it couldn't agree on a settlement, and the SEC has now filed a lawsuit alleging that Virtu's internal information barriers were inadequate; Virtu disputes the charges.

HEALTHCARE:

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  MorphoSys (MOR) - FDA granted Fast Track designation to MorphoSys for tulmimetostat, a drug to treat advanced endometrial cancer with specific mutations. This designation aims to speed up the drug's development for serious conditions with unmet needs.


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  Rocket Pharmaceuticals (RCKT) - Surged over 20% afterhours on news that it has reached alignment with the FDA on Phase 2 RP-A401 trial design for Danon Disease. It also announced that it intends to sell USD 150mln of stock, and to certain investors, pre-funded warrants to purchase shares of its common stock, in an underwritten public offering.

13 Sep 2023 - 09:30- Research Sheet- Source: Newsquawk