US EARLY MORNING: Index futures lower; CAD jobs data due later today ahead next week's key Tier 1 releases

US PRE-MARKETS: After the S&P 500 re-entered a technical bull market on Thursday, equity futures are pausing for breath, currently trading lower in pre-market trade. Treasury yields are widening by 2-3bps, the Dollar Index is slightly higher. Crude benchmarks are also languishing. Soft China CPI data, and the associated arguments surrounding a slowdown of the world’s second largest economy, appear to be putting a downer on markets ahead of a quiet day for data releases. The quiet docket will allow traders to begin focussing on next week’s key Tier 1 events, which include US CPI, FOMC, Retail Sales (and internationally, the ECB and the BoJ are also on the slate) – we include previews for the US events below. Before then, the CAD focussed traders will be looking to the jobs data due before the market open; we share some thoughts from Scotiabank in the section below, previewing today’s events.

S&P 500 TECHNICAL BULL MARKET: The S&P 500 re-entered bull market territory, rising 20% vs October lows. However, the debate on whether this is the beginning of a new bull market, or a bear market rally, continues. Barclays' strategists note that the top five largest stocks have contributed the highest proportion of SPX returns in 2023 compared to the past 20 years. Although the index weight of these stocks has slightly decreased, their returns account for nearly 75% of the S&P 500's overall returns this year. Barclays says that this concentration of returns is unusual, and stems from investors being underweight in key Tech names before the banking crisis-led "flight to Tech-as-Quality" in Q1. Now that these underweights have been mostly corrected, Barclays believes that positioning is taking a back seat to macro and earnings fundamentals. Barclays says the question remains whether these top stocks can live up to the high expectations surrounding their future earnings potential.

PREVIEW - US CPI (13/JUN): CPI is expected to rise 0.3% M/M in May, a little cooler than the prior 0.4%; the annual gauge is seen easing to 4.1% Y/Y from 4.9%. Bank of America is in line with the consensus in expecting the headline annual rate to fall to 4.1%, which would be the lowest reading since March 2021. BofA says the headline will be driven by a 3.0% decline in energy prices. It says that seasonal factors are also expected to contribute to the downward pressure. Food prices are anticipated to increase slightly due to a rise in food away from home, partially offset by a decline in food at home. Meanwhile analysts expect the core measure to rise +0.4% M/M, matching the pace of April's rise; the annual core measure is seen paring to 5.2% Y/Y from 5.5%. BofA says core inflation's rise will be led by a significant increase in used car prices, while core goods prices excluding used cars are expected to remain little changed. For core services, BofA sees a 0.4% increase, underpinned by shelter inflation, but offset by a decline in lodging away from home. BofA says it is closely monitoring supply chain pressures, trends in consumption spending on goods, and the ongoing deceleration in rent and owners' equivalent rent, and looking ahead, it expects a continued moderation in inflationary pressures.

PREVIEW - FOMC POLICY ANNOUNCEMENT (14/JUN): A Reuters poll revealed that economists generally expect the FOMC to hold rates at 5.00-5.25% next week, with only 8 of the 86 surveyed forecasting a +25bps rate rise. Looking ahead, 32 of the 86 economists still foresee at least one more rate hike later this year. Goldman Sachs thinks the Fed will pause in June meeting to assess the impact of previous rate hikes, as well as tighter bank credit, before considering another rate increase, with officials likely seeing a pause as prudent measure to avoid accidentally overtightening. Goldman says that economic downside risks have diminished, with resilience seen in hard data like spending and the labour market outweighing weakness in other survey data. The bank recently lowered its outlook on a recession, assigning a 25% probability (from 35%), and argues that progress towards a soft landing is on track, supported by improvements in the jobs market, reduced labour shortages, and cooling wage growth. GS also notes that although core PCE inflation has fallen less than expected, a significant deceleration is anticipated later this year. The bank says Fed officials have less reason to be concerned compared to last summer as inflation psychology normalizes and signs of cooling emerge.

PREVIEW - US RETAIL SALES (15/JUN): The consensus expects May's advance retail sales data to be unchanged vs the prior +0.4% M/M; the ex-auto and gas component is seen rising 0.3% M/M, paring from a rate of 0.6% previously, while the Retail Control Group is expected to rise 0.2% M/M following the 0.7% in April. Credit Suisse says the main factor driving the May weakness is likely to be a decline in nominal gasoline spending. However, when excluding auto and gas sales, retail sales are still expected to increase. Ahead, the bank has a bearish outlook for retail sales, noting that recent strength in the volatile non-store sales category is not sustainable. CS also expects sales of large durable goods related to housing to remain under pressure due to weakness in the housing market. Additionally, tighter financial conditions, diminishing excess savings, slower household income growth, and the resumption of student loan debt service in Q3 are expected to weigh on consumption growth.

TODAY’S AGENDA:

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  US RECAP: US stocks closed higher on Thursday, with technology stocks leading the rebound and the VIX dropping to post-pandemic lows. The rebound in technology and megacap stocks contributed to major indexes regaining ground. Notable movers included Amazon (AMZN), Nvidia (NVDA), Apple (AAPL), and Tesla (TSLA), which saw gains. GameStop (GME), however, experienced a significant decline as it underwent leadership changes and reported a larger-than-expected quarterly loss. Investors are eagerly awaiting the release of inflation data and the Fed meeting next week. Our US wrap is here.


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  APAC RECAP: In APAC, most indices traded higher, taking cues from Wall Street's gains. The Nikkei 225 led the gains in the region, with the index surpassing 32,000. The ASX 200 saw strength in the tech and mining sectors, but was limited by pressure in energy, following reports of a potential Iran-US interim deal on nuclear enrichment and oil exports (which was later denied). Hang Seng and Shanghai Composite were caught between the impulses of weaker-than-expected Chinese inflation data (see our recap below) and the possibility of improved US-China relations. Our APAC wrap is here.


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  CHINA CPI RECAP: China CPI -0.2% M/M in May, a little deeper than the expected -0.1%; the annual measure printed +0.2% Y/Y, short of the expected 0.3%, though picking up from the prior 0.1% Y/Y. The data highlights concerns about deflation and a cooling economy in China. Calls are increasing for the PBoC to cut interest rates as a measure to support the economy, with many advocating for rate cuts to ease financing burdens on private businesses and stimulate economic recovery. In addition to a possible RRR adjustment, economists are suggesting that an interest rate cut could be implemented as early as next week, Bloomberg reports. The PBoC has refrained from changing the rate on its one-year MLF since September, instead using other tools like targeted loans to provide support.


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  EUROPEAN OPEN: After Wall Street closed higher, and APAC stocks mostly gained, European equities are starting the last trading session of the week on a flat footing; the broad Stoxx 600 is on course to post a small weekly loss, while the blue chip Euro Stoxx 50, also slightly red on the week, and on course for a third straight week of losses. The data slate is quiet today ahead of a jam packed week ahead, which includes policy announcements from the Fed and the ECB, as well as other Tier 1 data releases. Accordingly, we are alert for potentially choppy trading in thin trading conditions today. There are a few releases to note (see our Agenda section below), including the Canadian jobs report, which could influence pricing for the BoC’s future moves, and as we have seen this week, potentially also having a knock-on in wider G10 FX. Our European morning cash open note is here.


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  DAY AHEAD: On the speaker's front, ECB Vice President de Guindos participates in a high-level seminar on Capital Requirement Regulations, while ECB supervisory chief Enria will speak in Milan; note, neither are likely to comment on monetary policy ahead of the ECB’s June confab on June 15th. The CBR is expected to keep its Key Rate unchanged at 7.5%. The North American day will see the release of Canada's jobs report; the street looks for 23.2k jobs to be added in May (vs prev. 41.4k). Scotiabank thinks the data will continue to show resilience in the labour market despite challenges in productivity, and while it did not influence the BoC's decision this week, it may impact future decisions. High job vacancies and seasonal hiring for summer jobs is set to contribute to the job market's strength, while wage growth will be closely watched, considering the inflationary implications, and hours worked will also be important in tracking GDP growth in Q2. In afternoon trade, Baker Hughes will release its weekly Rig Count data. On the CRA slate, DBRS is to review Spain's credit rating, and Fitch Ratings to review Greece. Our interactive calendar can be accessed here, a PDF version is here.

EQUITY NEWS:

COMMUNICATIONS:

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  Gaming Names - At the Summer Game Fest event, Ubisoft (UBSFY) unveiled "Prince of Persia: The Lost Crown" release date; Warner Bros. (WBD) showcased "Mortal Kombat 1"; Capcom (CCOEY) announced "Exoprimal" featuring "Street Fighter" charactersl Netflix (NFLX) revealed a new season of "The Witcher"; Sega (SGAMY) presented "Sonic Superstars"; Sony (SONY) announced the release date for "Spider-Man 2"; Square Enix (SQNXF) shared a new trailer for "Final Fantasy VII: Rebirth"; Sega (SGAMY) announced "Like a Dragon Gaiden: The Man Who Erased His Name"; Activision (ATVI) showcased the new season of "Call of Duty: Warzone 2."


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  Social Media Companies - Louisiana passes bill mandating parental consent for children's online accounts, NYT reports, granting parents the ability to cancel contracts on platforms like TikTok, Instagram, Roblox, and YouTube.


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  Meta Platforms (META) - Meta is experimenting with allowing users to watch Reels on their Quest VR headset, The Verge reports. It's unclear if it will be part of the Instagram app or a separate feature.


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  Zoom Video (ZM) - COO Aparna Bawa sold 7,000 shares on June 6th for a total USD 484,213.

TECH:

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  Nvidia (NDVA) - Nvidia's AI software vulnerability lets hackers bypass safety measures and expose private data, a new study cited by the FT warns.


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  TSMC (TSM) - The semiconductor company reported May sales of TWD 176.54bln (vs TWD 147.9bln in April).


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  DocuSign (DOCU) - Q1 adj. EPS 0.72 (exp. 0.56), Q1 revenue USD 661.4mln (exp. 641.8mln). Q1 billings +10% Y/Y at USD 674.8mln, Q1 Subscription revenue +12% Y/Y at USD 639.3mln, Q1 Professional Services and Other revenue +14% Y/Y at USD 22.1mln. Raises FY24 revenue outlook to between USD 2.713-2.725bln (exp. 2.7bln) from USD 2.7-2.71bln.


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  Palo Alto Networks (PANW) - CEO Nikesh Arora sold 549,838 shares; 474,300 were related to the exercise of vested options. Arora to sell up to 2mln shares from the 12-month period starting September.


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  ACI Worldwide (ACIW) - CEO Thomas Warsop purchased 43K shares on June 6th.


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  Braze (BRZE) - Q1 EPS -0.13 (exp. -0.18), Q1 revenue USD 101.8mln (exp. 100.4mln).


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  Expensify (EXFY) - Expensify will be added to the Russell 3000 Index on June 26th.


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  Fastly (FSLY) - Chief Architect Artur Bergman sold 209.7K shares on June 6th for a total USD 3.51mln.

HEALTHCARE:

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  Pharmacy Benefit Managers - FTC is investigating pharmacy benefit managers (PBM) and their impact on prescription drug prices. Emisar Pharma Services, a group purchasing organization (GPO) negotiating drug rebates for PBMs, receives request for information as part of investigation. 90-day response period given.


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  AstraZeneca (AZN), Sanofi (SNY) - FDA Advisory Committee recommends AstraZeneca/Sanofi's drug nirsevimab for preventing respiratory syncytial virus (RSV) in newborns and infants, with potential approval before the 2023-2024 RSV season.


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  Bristol-Myers Squibb (BMY) - Bristol Myers Squibb receives FDA approval for its new cell therapy manufacturing facility in Devens, Massachusetts, expanding its global cell therapy manufacturing capabilities.


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  Merit Medical Systems (MMSI) - Merit Medical adjusts its FY23 EPS outlook to USD 2.81-2.92 (epx. 2.90) and raises its revenue outlook to USD 1.23-1.24bln (exp. 1.22bln), reflecting recent acquisitions.


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  Vertex Pharmaceuticals (VRTX), CRISPR Therapeutics (CRSP) - Vertex and CRISPR announce FDA acceptance of BLAs for exa-cel in sickle cell disease and beta thalassemia, with target action dates set and updated trial data to be presented.


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  Walgreens Boots (WBA), Option Care Health (OPCH) - Walgreens Boots sells 10.8mln shares of Option Care Health for USD 330mln; will use the proceeds to pay down debt and support strategic priorities, simplifying its portfolio.


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  Charles River (CRL) - Charles River Labs and INADcure Foundation form a plasmid DNA manufacturing alliance to support the development of treatments for Infantile Neuroaxonal Dystrophy (INAD) and related neurodegenerative disorders.


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  AngioDynamics (ANGO) - AngioDynamics sells dialysis product portfolio and BioSentry for USD 100mln in cash. AngioDynamics narrows its FY23 revenue outlook to USD 338-339mln (exp. 338.8mln) from USD 338-342mln.

FINANCIALS:

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  Bank of America (BAC) - BofA appoints Alex Bettamio as co-head of global investment banking, alongside Thomas Sheehan, and promotes Faiz Ahmed to jointly run global capital markets with Sarang Gadkari, Reuters reports.


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  Credit Suisse (CS), Citi (C) - Credit Suisse and JV partner are reportedly looking for buyers for the China securities brokerage business, Reuters reports. Citi reportedly showed interest, but has since left discussions.

CONSUMER:

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  General Motors, Tesla (TSLA) - GM joins rival Ford in partnering with Tesla to use its North American charging network and technologies, CNBC reports. GM vehicles will access Tesla's chargers and use the NACS charging standard. The move is expected to put pressure on other automakers to adopt Tesla's technology.


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  Mercedes-Benz (MBG) - California issued an autonomous vehicle deployment permit to Mercedes-Benz, allowing it to offer the drive pilot automated driving system on designated highways.


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  Diageo (DGE LN) - Appoints Debra Crew as CEO of the company with immediate effect; she was named interim CEO on Monday, ahead of her planned joining date in July.


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  Vail Resorts (MTN) - Q3 EPS USD 8.18 (exp. 8.84), Q3 revenue USD 1.24bln (exp. 1.27bln). Exec expressed satisfaction with the overall results for the quarter and the 2022/2023 North American ski season. Despite weather disruptions, the company achieved record levels of visitation, resort net revenue, and Resort Reported EBITDA. Ancillary businesses also saw strong growth, and guest satisfaction scores surpassed pre-COVID-19 levels.


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  Duckorn Portfolio (NAPA) - Q3 adjusted EPS 0.16 (exp. 0.12), Q3 revenue USD 91.2mln (exp. 89.8mln). Upwardly revising Fiscal 2023 guidance. Sees FY23 EPS between 0.64-0.66 (exp. 0.64) from 0.63-0.65, and lifts FY23 revenue outlook to between USD 400-404mln (exp. 402.6mln) from USD 398-401mln.


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  e.l.f. Beauty (ELF) - CFO Mandy Fields sold 16,024 shares on June 7th at USD 106.72/shr.


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  First Watch Restaurant (FWRG) - First Watch Restaurant Group launches a secondary offering of 3mln shares of common stock by Advent International Corporation, with proceeds going to the selling stockholders.

INDUSTRIALS:

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  Raytheon Technologies (RTX) - Raytheon Technologies secures a USD 372.14mln Navy contract to update and enhance tactical capabilities and software blocks for F/A-18 and EA-18G aircraft.


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  Planet Labs (PL) - Q1 EPS -0.13 (exp. -0.15), Q1 revenue USD 52.7mln (exp. 52.9mln). Q1 Percent of Recurring ACV was 93%. End of Period Customer Count increased 9% Y/Y to 903 customers, Q1 Gross Margin expanded to 56% (vs 45% Y/Y).


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  Leonardo DRS (DRS) - Leonardo DRS awarded USD 94M US Army contract to produce next-generation infrared weapon sights for infantry snipers.


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  Dover (DOV) - CFO Brad Cerepak sold 17.8K shares on June 6th for a total USD 2.47mln.


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  Quanta Services (PWR) - Tax VP Dorothy Upperman sold of 4,074 shares on June 7th at USD 183.8667/shr.

MATERIALS:

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  Bunge (BG), Glencore (GLNCY) - Bunge is reportedly nearing a cash-and-stock deal to merge with Glencore's agricultural trading unit Viterra unit at a combined valuation of over USD 30bln, Reuters reports, adding that its potential impact would be examined closely by antitrust regulators.


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  Royal Gold (RGLD), Newmont Mining (NEM) - Royal Gold's Penasquito mine in Mexico suspends operations due to a strike. Newmont assures safe and orderly shutdown, but no timeline for resuming production.


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  Univar (UNVR), Apollo Global (APO) - Univar Solutions receives regulatory approvals from multiple countries for its acquisition by Apollo, with pending approvals from Turkey, US, France, and Spain. Transaction is expected to close in Q3 2023.

09 Jun 2023 - 09:01- EquitiesData- Source: Newsquawk