US EARLY MORNING: Futures are flat ahead of key risk events; ECB up next before US CPI tomorrow

US equity futures are around neutral. Traders say the three key risk events ahead – ECB today, US CPI tomorrow, FOMC next Wednesday – will be key in helping to inform whether the recent rangebound stock and bond price action will tilt to the upside or downside.

MARKETS: US equity futures are flat (RTY +0.1%, YM +0.0%, ES +0.0%, NQ +0.0%) ahead of the key ECB meeting today (preview here), which could have macro ramifications for traders, while Friday’s CPI data from the US is also now in focus, with the White House telling Americans to expect “elevated” inflation; both of these events come ahead of next week’s FOMC (+50bps expected, with updated forecasts). The S&P 500 mini is currently around 4,110, and has been traversing a range between c.4070-4200 in recent sessions, while US 10yr yields are currently just above 3.0%, towards the middle of the c.2.70-3.20% range seen in Q2. These three risk events in aggregate should help inform whether the top-end or bottom-end of these ranges will be tested in the weeks ahead.

Key US equity levels (via Credit Suisse):

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  SPX: 4058, 4080/74, 4094/93, 4110, 4138/33, 4168/78, 4195, 4212, 4224, 4248.


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  NDX: 11768, 11902, 12338/227, 12448/05, 12564, 12805, 12897, 12927/33, 13345, 13417.


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  RUT: 1840/30, 1854, 1872/71, 1894, 1907, 1920, 1936/40, 1953, 1971, 1991/96.

DAY AHEAD: Meanwhile, the main event today is the ECB confab. We’ll also get weekly initial jobless claims out of the US; the Street looks for claims to rise a little to 210k from 200k, while continuing claims are seen easing slightly to 1.305mln from 1.309mln. CAD traders will be noting comments due from the BoC’s Macklem and Rogers in the late US morning. The US Treasury concludes its notes/bonds supply with a sale of 30s today, which follows soft 3s and 10s auctions earlier this week. Full Day Ahead calendar here.

ECB: Theoretically, the ECB meeting is going to be hawkish: the street expects the end of APP to be announced, and expects a signal that rates will be lifted at the July meeting. However, money market pricing for the trajectory of ECB rates is already hawkish (125bps of hikes priced through the end of the year, meaning that markets expect three 25bps rate rises and one 50bps rate rise from the four remaining meetings in 2022, excluding today’s), while there is some risk that the central bank introduces or alludes to a mechanism to manage widening peripheral yields in the Eurozone (so-called fragmentation), of which the details will need to be gauged before judging their dovish or hawkish impulse. Our ECB preview can be accessed here.

US CPI: The White House has been telling Americans that it expects Friday’s CPI data to show headline inflation remains “elevated.” We should note that the White House is often framing these remarks to be easily digested by Joe and Jane Public, rather than financial market participants. Indeed, market participants are more attuned to the commentary of Fed officials, who have talked a hawkish game going into next week’s meeting, and the idea of a September pause has diminished after commentary from influential Fed officials. But the hawkish Fedspeak over the course of the last few weeks has clearly had an impact on the market’s expectations of inflation; 5yr breakevens are currently around 3.07%, off peaks of 3.62% seen earlier in Q2, and there are similar showings in the 10yr and 30yr breakeven space. Admittedly, these expectations have picked up a little of late, but still remain consistent with the current thesis that annualised inflation will continue to ease on the headline level. But traders want to see this in the monthly data; April’s release showed annual rates of inflation easing, but markets did not fully embrace this narrative given monthly metrics continued to rise. Credit Suisse said it expects Y/Y inflation likely peaked in March, but monthly inflation readings are likely to stay uncomfortably above the Fed’s target in coming months, adding that the Fed is set on raising rates by 50bps at the June and July meetings, but is looking for signs of deceleration in inflation to support shifting to 25bps in September. We’ll have more to say about US inflation in tomorrow’s Early Morning note.

EQUITY NEWS:

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  ABM Industries Incorporated (ABM) - Q2 EPS 0.89 (exp. 0.84), Q2 revenue USD 1.9bln (exp. 1.88bln). Exec noted that momentum seen at the start of the year continued, with solid demand across Business & Industry, Aviation, Manufacturing & Distribution, and Technical Solutions, especially in our eMobility business. Reiterates its FY22 adj. EPS outlook between 3.50-3.70 (exp. 3.62).


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  Airbus SE (EADSY) - May 2022 aircraft deliveries -6% Y/Y at approximately 47, according to Reuters which cited industry sources and tracking data. January to May aircraft orders were 364, 191 net. It delivered 237 aircraft, including 88 A320Neo, 93 A321Neo, and 24 A350.


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  Alphabet Inc. (GOOG) - Google is updating financial products and services policy to expand verification programmes for financial services advisers to new countries and markets, will roll out the policy in phases starting with Australia, Singapore and Taiwan.


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  Apple Inc. (AAPL) - Apple will itself handle a new buy now, pay later offering, sidestepping partners as the tech giant pushes deeper into the financial services industry, Bloomberg reports. A wholly owned subsidiary will oversee credit checks and make decisions on loans for the service, and will operate separately from the main Apple corporation, Bloomberg said, adding that the move marks the first time the iPhone maker was handling key financial tasks, a shift from using third-party credit processors and banks. Goldman Sachs has retained a smaller role in Apple’s new programme.


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  AstraZeneca (AZN) - Demonstrated pipeline and portfolio strength across malignant and rare haematological diseases at EHA 2022.


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  BioMarin Pharmaceutical Inc. (BMRN) - FDA said granted orphan designation for BioMarin’s treatment of primary hyperoxaluria type 1.


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  British American Tobacco (BTI) - H1 update noted that it was confident in delivering current financial targets, irrespective of the timing of the Russian business transfer. FY22 guidance maintained; FY global tobacco industry volume now expected around -3% (prev. -2.5%); US industry volume outlook remains uncertain.


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  Cisco Systems, Inc. (CSCO) - CEO told CNBC that he was seeing some improvements in the supply chains, and remained optimistic about the near-term outlook. Expects record EPS at the low-end of guidance this year.


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  Credit Suisse (CS), State Street (STT) - State Street said it was not going to respond to reports speculating that the bank could take over Credit Suisse; a Swiss Blog Wednesday reported that State Street could make a CHF 9/shr bid for Credit Suisse, adding that a push was imminent. A number of analysts have suggested that the deal was unlikely. Separately, Credit Suisse is reportedly tapping the brakes on its China expansion and delaying its local bank, according to Bloomberg.


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  Devon Energy Corporation (DVN) - To acquire leasehold interest and related assets of RimRock Oil and Gas for USD 865mln. Transaction expected to close in Q3 2022. DVN said it would be immediately accretive to its financially driven strategy.


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  EDF (ECIFY) - French government sources said it “would be a winner” to nationalise EDF “as quickly as possible”; nationalization was one of the priorities for the new government to undertake after legislative elections, Les Echos said.


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  Five Below, Inc. (FIVE) - Q1 EPS 0.59 (exp. 0.58), Q1 revenue USD 639.6mln (exp. 652.7mln). Exec said that while Q1 sales were softer than expected, disciplined cost management enabled it to deliver against our earnings outlook, adding that it was well positioned from an inventory standpoint with improved in-stocks and accelerated receipts for Summer and Back to School. Expects the macro environment to remain challenging this year. Sees Q2 EPS between 0.74-0.86 (exp. 1.20), and sees Q2 revenue between USD 675-695mln (exp. 729.5mln). Sees FY22 EPS between 4.85-5.24 (exp. 5.47), and sees FY22 revenue between USD 3.04-3.12bln (exp. 3.2bln).


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  Fluor Corporation (FLR) - Awarded a construction contract for the Interstate 35 Capital Express South project in Austin, Texas, and will book the near USD 548mln contract value in Q2 2022.


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  Forward Air Corporation (FWRD) - For the QTD through May 2022, revenue per shipment +40.7% Y/Y, weight per shipment +15.4% Y/Y, pounds per day +0.4% Y/Y. Exec said that it was continuing to add higher-quality tonnage, and based on its performance through May, gives confidence that FWRD will exceed the top end of its Q2 net income per diluted share guidance of USD 1.59-1.63.


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  Global Energy - Freeport LNG said that an explosion and fire at its Texas Gulf Coast facility, one of the largest LNG export plants in the US, will force the plant to shut down for at least three weeks. The terminal accounts for 16% of US export capacity, while Freeport LNG provides around 20% of US LNG processing.


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  Greif, Inc. (GEF) - Q2 adj. EPS 2.41 (exp. 1.71), Q2 revenue USD 1.67bln (exp. 1.5bln). Raised its FY22 EPS outlook to 7.45-7.75 (exp. 6.61, prev. 6.30-6.90).


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  Intel Corporation (INTC) - Intel is pausing all hiring in its client computing group, which is responsible for desktop and laptop chips, according to an email seen by Reuters. The news follows reports that Intel was rethinking near-term spending plans amid the economic uncertainty, WSJ said.


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  Meta Platforms Inc (META) - Meta’s ticker will today change to “META” from “FB”, in accordance with a previous company announcement. Separately, Meta’s top engineering leader responsible for its data centres and core infrastructure, David Mortenson, is stepping down from his role according to The Verge; follows the recently announced departures of COO Sandberg and head of AI Pesenti. Elsewhere, FTC Chair Khan said she would not rule out a settlement with Meta Platforms, which the agency sued in 2020, but indicated there was a high bar for any agreement, according to Reuters. Khan also criticised what she said was a large number obviously illegal deals, adding that she was not a fan of agreements to remedy problematic mergers with asset sales, nor does she like behavioural remedies.


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  Oxford Industries, Inc. (OXM) - Q1 EPS 3.50 (exp. 2.75), Q1 revenue USD 352.6mln (exp. 329mln). Q2 EPS outlook is between 3.30-3.50 (exp. 3.29), and Q2 revenue view is 350-370mln (exp. 347mln). Raises its FY22 EPS outlook to 9.60-10.00 (exp. 8.86), sees FY22 revenue between USD 1.285-1.325bln (exp. 1.24bln).


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  Rio Tinto (RIO) - Calls for proposals for large-scale wind and solar power development in central/southern Queensland, Australia to power aluminium operations in the area.


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  Roche (RHHBY) - FDA approves FoundationOneCDx as a companion diagnostic for Rozlytre.


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  Skillsoft Corp. (SKIL) - Q1 EPS -0.15 (exp. -0.17), Q1 revenue USD 164mln (exp. 167.4mln). Said the strength of its subscription based Skillsoft Content Segment is being offset by declines in the transactional Global Knowledge segment due to macroeconomic headwinds, and accordingly, it was trending towards the low end of its bookings and revenue outlook ranges for full year fiscal 2023. Reiterates FY23 revenue outlook between 765-790mln (exp. 773.6mln), sees FY23 bookings between USD 790-825mln.


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  Snowflake Inc. (SNOW) - CEO told CNBC that customers were not “falling off a cliff,” environment was not rocky but subdued and normal.


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  Tesla, Inc. (TSLA) - The automaker is to proceed with an online hiring event in China on Thursday and has added two dozen new job postings for the country, Reuters reported; last week CEO Musk flagged potential job cuts at Tesla, warning it was overstaffed. Separately, FTC Chair Khan said lawmakers’ concerns about Tesla’s autopilot system were on their ‘radar’, according to Reuters.


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  Thomson Reuters Corporation (TRI) - Announced approval for the annual renewal of its normal course issuer bid, and announced that it plans to repurchase up to USD 2.0bln of its shares under the new NCIB.


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  Twitter, Inc. (TWTR) - The social media company has agreed to provide a set of user data to Elon Musk, who disputes the level of bot presence on the platform, according to Washington Post and Axios.


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  Uber Technologies, Inc. (UBER) - Announced “Nationwide shipping,” allowing consumers across the US to order from merchants in New York City, Miami, and Los Angeles via the Uber Eats app.


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  Upstart Holdings, Inc. (UPST) - CFPB issued an order to terminate Upstart “no-action letter,” immunising the lender from being charged with fair lending law violations with respect to its underwriting algorithm, while the “no-action letter” remained in force. Upstart requested an amendment that would effectively seek an immediate termination. Some analysts said that Upstart might see lower originations following the CFPB measures.


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  Volkswagen (VWAGY) - CEO of Americas unit said it was actively looking to establish new assembly/battery facilities within the US, CNBC reported. Separately, Volkswagen is reportedly offering payoffs to Russian employees at one of their plants if they voluntarily quit, according to Kommersant.


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  Walgreens Boots Alliance's (WBA) - Boots has received a non-binding bid from Apollo Global Management and Reliance Industries, according to FT sources.


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  Zendesk, Inc. (ZEN) - JANA Partners to sue Zendesk over the company’s failure to set a date for its 2022 annual meeting under Delaware General Corporation Law. JANA also said reports that a sale process conducted by the Board was unlikely to result in a transaction.

09 Jun 2022 - 09:41- Fixed IncomeData- Source: Newswires