US EARLY MORNING: Index futures slightly higher, Treasuries little changed; Waller comfortable with 50bps in Dec

SNAPSHOT: APAC stocks traded mostly lower following a downbeat lead from Wall Street; European equities start Thursday’s cash trading session on a flat/higher footing ahead of the UK’s Autumn Statement and final Eurozone inflation data; US index futures are rallying by 0.3-0.6%, with the tech heavy/growth sensitive Nasdaq-100 leading gains; traders cite a slight easing in geopolitical tensions after the international community agreed that Russia did not fire a missile that landed in NATO member Poland’s territory. Additionally, comments from the Fed’s Waller were being framed as more dovish than his typical hawkish refrain, arguing that recent data has made him more comfortable with the prospects of a 50bps rate rise at the December FOMC, rather than a jumbo 75bps move; Waller offered the usual data-dependent caveats – and will be watching the next PCE and jobs data in particular – as he doesn’t want to be ‘head faked’ by the data. Treasury yields are little changed, the Dollar Index is a little lower.

GS OUTLOOK: In its global macro outlook for 2023, Goldman Sachs told its clients that this cycle is different. It noted that global growth slowed over the course of 2022 due to a diminishing reopening boost, fiscal and monetary tightening, as well as China’s Covid restrictions and property woes, while the Russia-Ukraine war was also a drag. Looking to 2023, GS forecasts global growth of a little under 1.8%; the bank thinks that the US’ resilience will contrast with a European recession, and China’s reopening process will be bumpy. “The US should narrowly avoid recession as core PCE inflation slows from 5% now to 3% in late 2023 with a 0.5ppt rise in the unemployment rate,” the bank writes, “the Eurozone and UK are probably in recession, mainly because of the real income hit from surging energy bills,” and “China is likely to grow slowly in H1 as an April reopening initially triggers an increase in Covid cases, but should accelerate sharply in 2H on a reopening boost.”

DAY AHEAD: The highlight of the day is the UK Autumn Statement, as the new administration attempts to restore domestic and international economic credibility; a link to our preview is below. Final Eurozone inflation data for October is expected to show the annual rate confirmed at 10.7% Y/Y. The US Day sees weekly initial jobless claims data, housing starts and building permits for October, the Philly Fed regional manufacturing survey for November (recall, the Empire Fed equivalent was a positive surprise this week). The Fed speakers’ slate is busy, with voters Bullard, Bowman, Mester to speak, as well as 2023 voter Kashkari and 2024 voter Bostic; SNB’s Maechler will deliver remarks which will have traders on edge after SNB Chair Jordan’s warnings on FX last week incited a macro response. Elsewhere, BoE chief economist Pill will speak in wake of the government’s UK Autumn Statement. Our full Day Ahead sheet can be accessed here.

PREVIEW - UK AUTUMN STATEMENT (11:30GMT/06:30EST): After the disastrous “mini-budget” in September and the subsequent removal of PM Truss and Chancellor Kwarteng, Chancellor Hunt will be presenting a full Autumn Statement on November 17th. Despite short-term UK borrowing costs stabilising since the bloodbath seen in late September and early October, the Chancellor will need to present plans to address the GBP 50bln “black hole” in its finances. Accordingly, Chancellor Hunt will need to embark on a programme of tax hikes and spending reductions. In terms of the split between spending and taxation, reporting from the FT (7th Nov) stated that the Chancellor currently intends to cut GBP 33bln from public spending while raising taxes by about GBP 21bln. Our full preview can be accessed here.

TECH:

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  NVIDIA Corp (NVDA) - Q1 adj. EPS 0.58 (exp. 0.69), Q1 revenue USD 5.93bln (exp. 5.77bln); Q1 data center sales USD 3.83bln (exp. 3.79bln), Q1 gaming sales USD 1.57bln (exp. 1.32bln), Q1 professional visualization sales USD 200mln (exp. 349.1mln). Sees Q4 revenue around 6.00bln +/- 2% (exp. 6.1bln). Exec said that sequential growth in Q3 data center revenue was impacted by softness in China. Exec said that certain export restrictions to China impacted Q3 revenue, with the decline largely offset by sales of alternative products into China. On crypto, belueves recent transition in verifying Ethereum crypto transactions from proof-of-work to proof-of-stake has reduced utility of GPUs for crypto mining.


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  Cisco Systems Inc (CSCO) - Q1 adj. EPS 0.86 (exp. 0.84), Revenue 13.6bln (exp. 13.31bln). Sees Q2 revenue growth of +4.5-6.5% (exp. +4.2%), and sees Q2 adj. EPS between 0.84-0.86 (exp. 0.85). Lifts FY23 revenue growth outlook to +4.5-6.5% (prev. +4-6%, exp. +5.1%). Exec said FY23 was off to a good start, supply chain issues eased slightly in Q1. Announced restructuring plan, which will include “talent movement options”. Said it would also optimise its real estate portfolio, beginning in Q2 of FY23. Expects to recognise pre-tax charges of approximately USD 600mln consisting of severance and other one-time termination benefits, real estate-related charges, and other costs.


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  UK Semis - UK blocks Chinese takeover of Newport chip plant, ordering Chinese-owned Nexperia to sell at least 86% of the factory in order to mitigate risk to national security.

COMMUNICATIONS:

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  Blizzard Entertainment, Inc (ATVI), NetEase, Inc. (NTES) - Announced it will be suspending most Blizzard game services in mainland China due to the expiration of the current licensing agreements with NetEase. Blizzard has had licensing agreements with NetEase since 2008, but the two have not reached a deal to renew the agreements “that is consistent with Blizzard’s operating principles and commitments to players and employees,” it said. Adds that while new sales will be suspend in the coming days, upcoming releases for ‘World of Warcraft: Dragonflight’, ‘Hearthstone: March of the Lich King’, and season 2 of ‘Overwatch 2’ will proceed later this year.

CONSUMER CYCLICAL:

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  Tesla (TSLA) - Board Director James Murdoch said Elon Musk has identified a potential successor in the “last few months” to run Twitter; added that the Tesla audit committee was monitoring the Twitter situation.


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  Sonos, Inc. (SONO) - Q4 adj. EPS -0.32 (exp -0.41), Q4 revenue USD 316.3mln (exp. 291.5mln). Exec said macroeconomic backdrop became significantly more challenging in FY22, but trends stabilised in Q4, adding that it is heading into the holidays with a good early response to its latest Sub Mini product, adding that its healthiest in-stock inventory position in three years. Board authorises stock buyback of up to USD 100mln. Announced Eddie Lazarus (interim CFO, CLO) has been appointed as CFO. Sees FY23 revenue between USD 1.7-1.8bln (exp. 1.72bln).


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  Bath & Body Works, Inc. (BBWI) - Q3 adj. EPS 0.40 (exp. 0.20), Q3 revenue USD 1.6bln (exp. 1.56bln). Q4 EPS seen between 1.45-1.65 (exp. 1.55). Lifts FY22 EPS outlook to 3.00-3.20 (exp. 2.90, prev. guidance was for 2.70-3.00). Exec said “looking forward through the remainder of the year and beyond, we are pleased with our assortment - a great mix of returning holiday favourites and new giftable offerings.”


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  Burberry (BURBY) - H1 revenue GBP 1.34bln (exp. 1.31bln), retail comparable store sales +5%, wholesale +1%. Maintains near-term guidance to FY24.


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  Flutter Entertainment Plc (PDYPY) - Targets 12% gross win margin at FanDuel in 2025, says unit can deliver long-term EBITDA margins between 25-30%, which would be similar to other divisions. Sees units monthly active customers rising to 2.3mln in FY22. Sees the overall value of the US sportsbook and iGaming market increasing to USD 40.5bln by 2030 vs current USD 9bln. Believes it will be at the upper-end of the long-term revenue forecast.


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  Global-e Online Ltd. (GLBE) - Q3 EPS -0.41 (exp. -0.30), Q3 revenue USD 105.6mln (exp. 100.9mln). Sees Q4 revenue between USD 135.5-141.5mln (exp. 150mln).

INDUSTRIALS:

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  Siemens AG (SIEGY) - Q4 revenue EUR 20.57bln (vs guidance for EUR 19.13bln), Q4 orders EUR 21.82bln (vs 19.89bln guide). Sees 2023 EPS (pre-power purchase agreement) between 8.70-9.20 (exp. 8.60). CEO sees strong demand continuing for hardware and software.


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  Renault (RNLSY), Nissan Motor Co. (NSANY) - Renault could transfer a portion of its stake in Nissan to a trust, in order to match Nissan’s holdings in Renault, according to Nikkei.


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  Airbus (EADSY), Dassault Aviation (DUAVF) - France and Germany reportedly close to formally moving to the next phase of the Future Combat Air System, FT said; deal may be reached in days.


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  Atos (AEXAY) - Atos Enters into exclusive negotiations to sell Atos Italia; with the proposed transaction, two-thirds of Atos’ EUR 700mln divestiture programme would be secured in less than five months.


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  Stellantis (STLA) - Accelerates autonomous driving journey with the acquisition of aiMotive.

FINANCIALS:

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  Eurozone Banks - ECB officials repotredly might favour a 50bps rate hike in December rather than 75bps, although inflation surge could still lead to 75bps; initial discussions are not showing momentum for 75bps, according to Bloomberg sources.

HEALTH CARE:

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  MorphoSys (MOR) - Q3 EPS (EUR) -3.60 (vs -3.30 Y/Y), Q3 revenue EUR 95.8mln (vs 41.2mln Y/Y); raises FY22 Monjuvi revenue guidance.

MATERIALS:

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  ThyssenKrupp (TKAMY) - Q4 revenue EUR 10.57bln (exp. 9.69bln), adj. EBIT EUR 161mln (exp. 237mln), proposes a dividend of 0.15/shr (exp. 0.19/shr). IPO remains the preferred solution for the Nucera hydrogen unit, continues to prepare a stand alone solution for the steel unit though the exact form cannot be determined currently. In talks with possible buyers for the automation engineering business, begun M&A process for Springs & Stabilisers.

ENERGY:

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  UK Energy - UK will reportedly spend billions on energy efficiency to cut demand by 13%, according to Bloomberg.

17 Nov 2022 - 09:30- Research Sheet- Source: Newsquawk