US EARLY MORNING: Index futures are around flat ahead of mega-cap earnings

US PRE-MARKETS: US index futures are trading around neutral ahead of today's heavy earnings docket, which includes the likes of Microsoft (MSFT) and Alphabet (GOOG). Treasury yields are wider, with the belly underperforming, though the magnitude of losses is not great. Traders will also be cognizant of the FOMC meeting on Wednesday, ECB meeting on Thursday, and Friday's BoJ meeting; additionally, we also get the US advanced GDP numbers for Q2 on Thursday; and on Friday, we'll see the release of the PCE inflation data, which is said to be the Fed's preferred gauge, as well as the Employment Cost Index - these data will not be released ahead of the Wednesday Fed decision (base case is +25bps rate rise, our preview is here), but may shape expectations of where the Fed's terminal rate will end up.

MS, JPM US EQUITY OUTLOOKS: Morgan Stanley's US equity strategist Mike Wilson admitted the bank was wrong in sticking with pessimism on equities for too long. Wilson said MS underestimated the rally in 2023, as the S&P 500 surged despite falling profits, and its forecast for the S&P 500 at 3,900 was left behind as the index topped 4,500. The bank now sees the index at around 4,200 by June 2024, though they remain cautious on corporate earnings power due to softening inflation. There are no signs of such a mea culpa from JPMorgan's strategist Marko Kolanovic, who remains bearish on equities despite the market rally. He warned that aggressive interest-rate hikes by central banks, decreasing consumer savings, and geopolitical concerns could lead to market declines and increased volatility. Despite the current market surge and optimism, Kolanovic believes that macroeconomic indicators will eventually reflect the impact of monetary tightening. He sees the recent market gains as a result of "mechanical re-risking" and warns of a potential bubble, expressing caution about the future outlook.

TODAY’S AGENDA:

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


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  EUROPE DAY AHEAD: The German Ifo is expected to see moderate declines in its headline indices, though traders will be braced for worse given the tone of the flash July PMI data released this week. Ahead of the ECB’s policy announcement on Thursday (+25bps expected), its Bank Lending Survey will give a glimpse on how monetary policy transmission has been impacting the financials sector. In the UK, the CBI’s industrial trends data for July, and the business optimism reading for Q3 will be released. On the central banking front, the NBH is expecting to keep the base rate unchanged at 13%, and its deposit rate at 12.5%. On the supply slate, the UK Will auction GBP 3bln of 2038 debt, while Italy will sell between EUR 3.25-3.75bln of 2025, and EUR 1-1.25bln of 2033 BTPeis.


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  US DAY AHEAD: The US day will see the release of the May FHFA and CaseShiller house price data. Analysts will closely watching the Consumer Confidence data for July, which is expected to tick-up at the headline level; as always, we will be closely listening out for any commentary on how price pressures are evolving. Elsewhere, the Richmond Fed's manufacturing gauge, and the weekly RedBook are due to be released. On the supply front, the US will sell USD 43bln of 5yr notes.  The corporate earnings slate gets busy, with some mega-weights on today's docket; highlights include Microsoft (MSFT), Google (GOOG), Visa (V), Waste Management (WM), Texas Instruments (TXN), General Electric (GE) and 3M (MMM); our Daily US Earnings Estimates can be accessed here.


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  ENERGY: The API will report weekly energy inventory data after the bell, ahead of the DoE’s more widely viewed release on Wednesday. This week, the street expects headline crude stocks to draw 2mln, distillates to draw 0.1mln, while gasoline stocks are seen declining by 2mln.

EQUITY NEWS:

CONSUMER:

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  Toyota (TM) - Toyota's JV in China has terminated the contracts of around 1,000 dispatch workers due to pressure from a price war in the Chinese auto market, Reuters reports. Toyota aims to revive sales with electric vehicle models and has already reduced the price of its bZ4X EV. Mitsubishi Motors is also cutting staff costs at its Chinese JV. Japanese automakers have faced sales slumps in China, with Chinese brands gaining market share.


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  Whirlpool (WHR) - Q2 adj. EPS 4.21 (exp. 3.76), Revenue USD 4.79bln (exp. 4.82bln). North America net sales 2.82bln, (exp. 2.85bln). EMEA net sales 854mln, (exp. 923.2mln). Latin America Net Sales 819mln, (exp. 774.5mln). Asia net sales 295mln (exp. 306.6mln). Ongoing EBIT 352mln (exp. 322.9mln). Free cash flow 587mln (exp. 582mln). FY Forecasts: Sees ADJ tax rate 10%-15%. Still sees revenue about 19.4bln, (exp. 19.21bln). Still sees ongoing EPS 16-18 (exp. 15.99). Still sees cash from operating activities about 1.4bln (exp. 1.17bln). Still sees free cash flow about 800mln (exp. 714mln).


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  Unilever (UL) - H1 sales EUR 30.4bln (exp. 29.48bln); Q2 underlying sales +7.9% (exp. +6.6%); continues to expect a modest improvement in underlying FY operating margin.


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  Nio (NIO) - Cyvn Investment reports 7.7% stake in Nio; entitled to nominate one director to the board.


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  Adidas (ADDYY) - Adidas receives over EUR 508mln in orders for around 4mln pairs of unsold Yeezy shoes, FT said, exceeding its most optimistic forecast. Barron's added that the sports apparel maker raised its guidance ahead of its August 3rd earnings report, stating that operating profit dropped by around 55%, but the sale of Yeezy shoes helped reduce its annual loss forecast from EUR 700mln down to EUR 450mln.


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  Kellogg (K) - Kellogg plans to split into two businesses: Kellanova, focused on global snacking and frozen foods, and WK Kellogg Co, centred on cereals. The separation is targeted for Q4 2023, pending approvals.


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  Boston Beer (SAM) - Appointed Diego Reynoso as CFO and Treasurer, effective September 5th. Most recently served as CFO of Tyson Foods's Prepared Foods division.


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  Packaging Corp (PKG) - Q2 adj. EPS 2.31 (exp. 1.93), revenue USD 1.95bln (exp. 1.99bln). Sees Q3 EPS USD 1.88 (exp. 1.94). Sees seasonally stronger volume in paper segment from back-to-school shipments.


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  Inter Parfums (IPAR) - Q2 revenue USD 309mln (exp. 281.8mln). Raises FY23 revenue outlook to USD 1.3bln (prev. guided 1.25bln, exp.  1.25bln) on healthy fragrance market, ongoing consumer demand.

TECH:

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  Taiwan Semiconductor Manufacturing Company (TSM) - TSMC will invest USD 2.87bln in an advanced packaging facility in northern Taiwan due to increased demand for AI, Reuters reports. The chipmaker plans to double capacity for advanced packaging to meet customer needs.


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  GlobalFoundries (GFS), TSMC (TSM) - GlobalFoundries CEO criticised Berlin's subsidies to TSMC for a planned chip plant in Germany, FT reported, adding that it risked leading to dependence on a single supplier and distort competition. TSM declined to comment after the remarks.


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  Chipmakers - Rapidus, a chipmaker created by the Japanese government and eight companies, plans to supply chips to major US tech firms, Nikkei reports. The group is aiming to begin production of advanced 2nm chips in 2025.


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  Apple (AAPL) - More than 1,500 UK app developers are suing Apple for USD 1bln over its App Store fees, Reuters reports. The developers claim that Apple's charges are excessive and unfair due to its app distribution monopoly.


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  NXP Semiconductors (NXPI) - Q2 saw top- and bottom-line beats, and it issued an upbeat outlook. Q2 adj. EPS 3.43 (exp. 3.27), revenue USD 3.30bln (exp. 3.21bln). Sees Q3 EPS USD 2.68-3.10 (exp. 2.64). Sees Q3 adj. EPS between 3.39-3.82 (exp. 3.43). Sees Q3 revenue between USD 3.30bln-3.50bln (exp. 3.31bln).


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  Cadence (CDNS) - Q2 adj. EPS 1.22 (exp. 1.18), Revenue USD 976.6mln (exp. 974.7mln); to raise 2023 revenue guidance to more than 14% growth over 2022. Sees FY23 adj. EPS between 5.05-5.11 (prev. 4.96-5.04, exp. 5.01), adj. operating margin between 41.2-42.2% (prev. 41-42%, exp. 41.4%), Revenue between USD 4.05-4.09bln (prev. 4.03-4.07bln).


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  F5 Networks (FFIV) - Q3 EPS 3.21 (exp. 2.86), revenue USD 703mln (exp. 699.4mln). Exec said environment remains challenged by macroeconomic uncertainty. Sees Q4 EPS between 3.15-3.27 (exp. 3.22), and Q4 revenue between 690-710mln (exp. 701.9mln).


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  Logitech (LOGI) - Q1 EPS 0.65 (exp. 0.46), revenue USD 974.5mln (exp. 919.7mln). Raised outlook for H1 24 to between USD 1.875-1.975bln (previously, guided between USD 1.8-1.9bln), and raised H1 24 operating income view to USD 180-220M from USD 160-190M.


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  SalesForce (CRM) - CEO Marc Benioff sold 15K shares on July 21st for a total USD 3.4mln.

COMMUNICATIONS:

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  Social Media Stocks - TikTok is introducing a new feature that allows users to create short-form text posts, Engadget reported, adding that it was similar to Meta's Instagram Stories.


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  Liberty Global (LBTYA) - Q2 adj. EBITDA USD 601.4mln (prev.649.8mln Y/Y), Q2 revenue USD 1.848bln (vs 1.754bln Y/Y). Confirms FY guidance targets. Said demand for reliable high-speed connectivity remains strong despite price adjustments. Exec said in H2, price adjustments should increasingly help to offset anticipated headwinds from energy and labour costs.

REAL ESTATE:

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  Real Estate Indices - MSCI will discontinue the MSCI World Real Estate Index from November 1st.


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  Crown Castle (CCI) - Initiated a restructuring plan, to cut employee headcount by about 15%, sees related charges of about USD 120mln.


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  Alexandria Real Estate (ARE) - Q2 AFFO/shr 2.24 (exp. 2.19), Revenue USD 713.9mln (exp. 695.5mln). Still sees FY23 FFO/shr 7.95-8.01 (exp. 8.94). Still sees FY23 EPS 2.72-2.78 (exp. 2.68).


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  Digital Realty (DLR) - Digital Realty is forming a JV with Brookfield Infrastructure and Reliance Industries to develop data centres in India. Plans to build centres in Chennai and Mumbai. Each partner will own one-third of the venture.

FINANCIALS:

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  Apollo Global (APO) - Apollo Global is investing in PetSmart, a pet retailer in North America. BC Partners, along with other co-investors, will still be the majority shareholder. The deal is expected to close in Q4, subject to approvals. Specific financial details were not disclosed.


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  Brown & Brown (BRO) - Q2 adj. EPS 0.68 (exp. 0.59), Q2 revenue USD 1.05bln (exp. 997.5mln). Exec noted significant momentum going into the H2.

HEALTHCARE:

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  Bayer (BAYRY) - Lowers FY outlook due to a significant further decline in sales of glyphosate-based products. Sees FY EPS between EUR 6.20-6.40 (exp. 6.95), sales between EUR 48.5-49.5bln (prev. 51-52bln, exp. 49.74bln). Said Q2 prelim sales were about EUR 11bln (exp. 12.2bln).


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  Novartis (NVS) - CEO warned that US drug pricing reform may be a risk to public health. Said that under President Biden's Inflation Reduction Act, will have a shorter exclusivity period of nine years vs 13 years for drugs deliveries.


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  AbCellera (ABCL) - AbCellera won a legal battle as the US Patent Office denied Berkeley Lights' request for a rehearing. The dispute was over AbCellera's patent related to microfluidic devices used in monoclonal antibody development.


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  Gilead (GILD) - Presented new data at a medical conference showing the effectiveness and safety of lenacapavir, an injectable HIV treatment given twice-yearly. Patients reported positive outcomes and the drug led to high rates of virologic suppression. Gilead aims to optimize HIV treatment based on patient experience and insights.

MATERIALS:

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  Nucor Corp (NUE) - Q2 EPS 5.81 (exp. 5.53), revenue USD 9.52bln (exp. 9.62bln); average scrap and scrap substitute cost per gross tonne 455 (exp. 449.84); sales tons to outside customers 6.59mln (exp. 6.81mln); average sales price per tonne in Q2 2023 increased 7% vs Q1 2023. Expects earnings in Q3 of '23 to decrease vs Q2. Expects earnings for steel mills segment to decline in Q3 Q/Q. Earnings of steel products segment are expected to moderate in Q3 Q/Q. Earnings for raw materials segment are expected to decrease in Q3 Q/Q.


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  Cleveland-Cliffs (CLF) - Q2 EPS 0.67 (exp. 0.70), Q2 revneue USD 6bln (exp. 5.8bln). Exec said it saw total steel shipments of more than 4.2mln net tons, a direct result of another record in automotive shipments. The shift to a higher automotive mix led to even higher realised prices than it had expected. Ahead, sees another USD 40.00 per net ton reduction in steel unit costs, and an additional USD 10.00 per ton reduction from Q3 to Q4. Cost reduction objectives remain on target


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  Akzo Nobel (AKZOY) Q2 revenue misses, raises FY23 outlook. Q2 adj. EBITDA EUR 397mln (exp. 402.5mln), revenue EUR 2.74bln (exp. 2.85bln). FY23 adj. EBITDA seen between EUR 1.40-1.55bln (prev. 1.2-1.5bln). Saw the first effects of raw material deflation.

INDUSTRIALS:

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  Thales (HO FP) - Thales is to purchase Imperva for an USD 3.6bln enterprise value. Thales total cybersecurity business will generate more than EUR 2.4bln revenues.


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  Hexcel (HXL) - Q2 adj. EPS 0.50 (exp. 0.48), Q2 revenue USD 454.3mln (exp. 448.4mln). Raised FY23 adj. EPS outlook to between USD 1.80-1.94 (prev. guided 1.70-1.90, exp. 1.97), and FY23 revenue now seen between USD 1.765-1.835bln (prev. guided 1.725-1.825bln, exp. 1.81bln).


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  Huntington Ingalls (HII) - Awarded a max USD 528mln contract from the US Navy to support maintenance of nuclear-powered aircraft carriers in San Diego.

ENERGY:

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  Shell (SHEL) - The energy giant is selling its Masela Block stake for up to USD 650mln.

UTILITIES:

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  Southern Company (SO) - Executive Kimberly Greene sold 20k shares on July 21st at USD 72.62/shr.

25 Jul 2023 - 09:30- EquitiesData- Source: Newsquawk