US EARLY MORNING: Index futures slip on hawkish Powell; big week ahead for macro data, including US jobs and ISM, Eurozone inflation, China PMIs

SNAPSHOT: US equity futures have begun the week on the defensive after Fed Chair Powell continued to talk a hawkish game at Jackson Hole last week (and ECB officials did too), and ahead of a huge week for macro data, where key data points includes the jobs report on Friday (which will provide a great deal of influence on the September 21st FOMC) and the manufacturing ISM survey on Thursday (additionally, Eurozone flash inflation data and China NBS surveys are both due Wednesday). YM -0.5%, ES -0.6%, RTY -0.7%, NQ -0.9%. Treasury yields are wider by 5-8bps, with the bulk of underperformance in the belly; this is leaving major curve spreads mixed, with the longer-dated spreads narrowing, while the shorter-dated spreads are widening only modestly. The Dollar Index can not muster any meaningful bid amid higher yields, however, trading up around one-tenth of a percent, but remains above the 109.00 figure. Crude futures have added around a buck this morning after weekend news that Iran is reviewing US responses, which would mean any Iranian response could come on Friday at the earliest.

SPX TECHS VIA BOFA: Bank of America’s technicians have again been flagging risks that the S&P 500 could drop to the low 3,900, arguing that the ‘Jackson Hole’ failure at 4,195-4,219 (a downside gap from August) suggested an August head-and-shoulders technical pattern top, implying downside risk to the low 3,900s. BofA is also keeping an eye on the 100-dma and 50-dma at 4,073 and 3,996 respectively, and has flagged up the potential of tactical retracements at 4,062 (38.2% fib of the June-August rally), 3,981 (50%) and then 3,900 (61.8%). By style, BofA says that Growth may struggle from a technical perspective; "Communication Services remains vulnerable on new relative lows as a bear flag pattern points lower, Discretionary stalls below declining 40-week MAs on both an absolute and relative price basis. Technology remains vulnerable with a failure near its declining 40-week MA and a potential right shoulder of a head and shoulders top relative to the SPX." The view is more mixed in defensive sectors, BofA says, where Consumer Staples have a double top vs SPX, but hold weekly MA support vs the SPX as an absolute price breakout remains intact; Health Care is struggling as it corrects vs the SPX and stalls at absolute price resistance; Real Estate appears bearish as the sector fails near its absolute price 40-week MA and breaks support relative to the SPX; Utilities look bullish with a dip in an uptrend as the sector holds tactical support vs the SPX. Cyclicals, meanwhile, are firming up, with Energy reasserting a bullish absolute and relative price trends; Financials hold a 14-year big breakout point and rising 200-week MA as the sector forms a potential bear trap relative to the SPX; Materials have mixed technicals as the relative chart holds big support and the absolute chart struggles with resistance.

DAY AHEAD: The docket for the Day Ahead is barren, with attention largely on the more A-list events of the week, including China NBS PMI surveys on Wednesday, Eurozone flash inflation on Wednesday, US ISM manufacturing survey on Thursday, and the key US jobs report on Friday. Our full Day Ahead is here; our full week ahead preview is here. NOTE: UK players are away for Bank Holiday on Monday, will return Tuesday. 

EQUITY NEWS:

COMMUNICATIONS:

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  Amazon.com, Inc. (AMZN) - WSJ said that Amazon had turned the ‘The Lord of the Rings: The Rings of Power’, which premiers on September 2nd, into the most expensive show of all time, costing roughly USD 715mln, or around just over 5.1mln annual Prime subscriptions, or around 0.15% of Amazon’s 2021 revenues.


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  Meta Platforms, Inc. (META) - Meta agrees to settle Cambridge Analytica lawsuit, though details of the settlement with users was not provided. Separately, the chief of Meta's virtual reality social platform Horizon, its main gateway for accessing the metaverse that the company is building, is leaving for a new opportunity, Reuters reported; his team will now directly report to Meta's vice president of Metaverse.


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  Comcast Corporation (CMCSA) - NBC mulls cutting the number of hours it programs in prime time, sources told the WSJ, in a cost-cutting move that would reflect broadcast television’s diminishing popularity.


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  Deutsche Telekom AG (DTEGY), T-Mobile US, Inc. (TMUS) - Barron's makes positively mentions Deutsche Telekom, said it was an alternative way to play T-Mobile's growth and future buyback programme via shares of its largest stakeholder; Barron's said that when backing out the value of Deutsche Telekom's stake in T-Mobile US, worth USD 90bln at current market levels, the remaining European telecom business is cheap at just USD 4bln, and there’s room for improvement if it pays down debt and potentially turns cash flow toward a higher dividend.


• 
  Netflix, Inc. (NFLX) - Netflix mulls pricing its new advertising-supported tier at USD 7-9 per month, half as much as its current, most-popular plan, which costs USD 15.49 monthly with no commercials, Bloomberg reported. Separately, Netflix has opted not to order a second season of Resident Evil, its action horror series loosely based on the popular video game franchise, Deadline reported, with the drama not having a particularly strong showing on Netflix’s Top 10, and cost vs viewing is the streamer’s leading renewal criterion.


• 
  Walt Disney Company (DIS) - ICC said Disney's Star has secured a deal to air global cricket events to Indian subscribers through the end of 2027, after losing broadcast rights earlier this year for a popular Indian cricket league, WSJ reported. Financial terms weren’t disclosed. Separately, the WSJ reported that attendance at Disney's parks remains below pre-pandemic levels, but Disneyland and Disney World are making more money than ever after raising some prices and eliminated or started charging for other services and features that used to be free.


• 
  Warner Bros. Discovery, Inc. (WBD) - HBO's 'Game of Thrones' prequel series 'House of the Dragon' has been renewed for a second season, after more than 20mln people watched the first episode.

TECH:

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  Amazon.com, Inc. (AMZN), Apple Inc. (AAPL), Alphabet Inc. (GOOG) - Amazon Web Services is preparing to unveil a cloud service to help companies improve the way they target ads to potential customers without violating data privacy laws, according to The Information, as advertisers try to recover from Apple’s and Google’s restrictions on their ability to track consumers online.


• 
  Apple Inc. (AAPL) - DoJ is reportedly in the early stages of drafting a potential antitrust complaint against Apple, Politico reported, a sign that a long-running investigation may be nearing a decision point and a suit could be coming soon, perhaps by the end of the year. DoJ has not yet made a final decision on whether or when to sue Apple.


• 
  NVIDIA Corporation (NVDA) - Cautious mention in Barron's, said it is sceptical about some investors' hopes for a quick turnaround, noting that NVDA is facing multiple threats, including rising competition, an unsustainable pricing structure, and a potential crypto used-card glut that will be difficult to overcome.


• 
  Open Text Corporation (OTEX), Micro Focus International plc (MCRO LN) - Open Text's largest shareholder Jarislowsky Fraser, who owns a 5.6% stake, backed its acquisition of Micro Focus, arguing that the deal makes financial sense despite a 99% takeover premium.


• 
  Juniper Networks, Inc. (JNPR) - Positive mention in Barron's, said Juniper had lousy earnings, but its AI strategy could push the stock higher.

CHINA:

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  China Covid - China is enforcing lockdown restrictions in areas around Beijing more intensively, will mass test the nearby port city of Tianjin, stepping up its quest to wipe out Covid ahead of a key meeting of the Communist Party’s top leaders. Additionally, on Monday, the Huaqiangbei region has been ordered to shut between Monday and Thursday to contain a new COVID outbreak, SCMP reported, adding new risks to supply chains, as the hi-tech industry accounted for 20% Shenzhen’s GDP in 2020.


• 
  China-US - US Navy sailed two warships through the Taiwan Strait on Sunday, in the first such transit publicized since House Speaker Nancy Pelosi visited Taiwan earlier in August, Politico reported.

HEALTH CARE:

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  Monkey Pox - The CDC is cautiously optimistic that monkeypox outbreak might be slowing as cases fall in major cities, CNBC reported.


• 
  Abbott Laboratories (ABT) - Abbott is to restart production of its Similac baby formula at a Michigan plant that had been shut over contamination concerns, which triggered a nationwide formula shortage, NYT reported.


• 
  Bristol-Myers Squibb Company (BMY) - Late-breaking results from Phase 2 AXIOMATIC-SSP study of Milvexian showed favourable antithrombotic profile in combination with dual antiplatelet therapy.


• 
  AstraZeneca (AZN) - New data show Farxiga significantly lowers the risk of cardiovascular death in patients with heart failure.


• 
  Bayer (BAYRY) - Bayer initiates landmark Phase III study program to investigate oral FXIa inhibitor asundexian, as the it seeks to refresh a portfolio facing cheap competition, according to Bloomberg.


• 
  Valneva (VALN) - Announced further positive Phase IIII Immunogenicity and the First Heterologous Booster results for its inactivated, adjuvanted COVID-19 Vaccine VLA2001.


• 
  Novartis (NVS) - Scemblix has been approved in the EU for adults with chronic myeloid leukaemia.

MATERIALS:

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  Alcoa Corporation (AA) - Positive mention in Barron's; said the outlook for aluminium was brightening, and Alcoa was probably the best pure play on the versatile and light metal, with the stock looking like a bargain.


• 
  Rio Tinto (RIO) - A committee has warned that a major tailings dam at its former Panguna mine is at risk of failure, The Australian reported.

ENERGY:

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  Engie SA (ENGIY) - Engie is closing in on an agreement with Algeria for an increase in imports of natgas, a deal that could come after an official visit to the country by President Macron, Bloomberg reported.


• 
  Iranian Crude - Iran state-run Nour News said it would take until at least September 2nd to respond to US comments on an EU-drafted text aimed at salvaging the 2015 pact as it carefully reviews the US' response at the expert level.


• 
  Ukraine Nuclear - IAEA inspectors are poised to make an emergency visit to Ukraine’s Russia-occupied Zaporizhzhia nuclear power plant early next week, WSJ reported, after a breakthrough in negotiations over access. The team could bring spare parts, radiation-monitoring devices and other vital materials to the plant amid fears that fighting in the area that has damaged power lines and caused fires at the facility could lead to a nuclear catastrophe.


• 
  German Energy - Germany Economy Ministry said gas-storage facilities were filling up faster than planned, despite uncertainty over supplies through a key pipeline from Russia, and predicted that an October target of 85% capacity should already be reached early next month, Bloomberg reported. Separately, German Finance Minister Lindner told Bild am Sonntag said the government needs to address soaring power prices with urgency or inflation would be increasingly driven by an electricity crisis, and said the power market should be overhauled so that prices are no longer coupled to ever-more expensive gas, generating billions of euros in profits for operators of wind, solar and coal facilities at the expense of consumers, Bloomberg said.


• 
  UK Energy - Frontrunner for the Tory leadership Liz Truss is mulling cutting income tax and VAT as part of an emergency package to reduce the pain millions of households will feel from soaring energy bills, The Times reported.

INDUSTRIALS:

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  Ford Motor Company (F) - Ford is hiking the starting prices of its electric Mustang Mach-E crossover by more than USD 8k for some models, CNBC reported. Ford said the hikes were due to significant material cost increases, continued supply chain strains and market conditions.


• 
  Honda (HMC), LG Energy Solution (373220 KS) - Honda and LG Energy to invest USD 4.4bln to construct a US battery plant.


• 
  Airlines - Airlines are sticking with their recovery playbook, cutting growth plans to improve reliability for passengers, and are keeping flight cuts and other curbs as industry woes drag on, WSJ said.


• 
  Rolls-Royce (RYCEY) - Rolls-Royce plans a charm offensive in Japan after the country last week pledged to build new nuclear plants in response to rising energy. Rolls-Royce said to have held tentative talks with officials according to the Telegraph.


• 
  Hapag-Lloyd (HPGLY) - CEO sees clear signs of normalising supply chain constraints; said six months ago, ships were overbooked by three-to-four times, now ships are around 20% overbooked, according to Handelszeitung.


• 
  Royal Boskalis Westminster NV (RBWNY) - Boskalis and HAL Holding agree on a recommended offer of EUR 33/shr for Boskalis; Boskalis closed at EUR 32.08 on Friday.


• 
  Airbus (EADSY) - Malaysia's AirAsia plans to resume the deliveries of 362 A321neos in 2024, according to the CEO of AirAsia's parent firm.

FINANCIALS:

• 
  S&P 500 Shorts - Investors are increasing bets on a market downturn, WSJ reported, a sign of waning sentiment that analysts say could presage a return to the volatile trading of the first half of 2022. S&P 500 futures net short positions have grown to levels not seen in two years. Short interest has picked up in the fund tracking popular technology shares. Separately, CNN reports that September is historically the worst month of the year for the stock market, in a cautious article.


• 
  Regulation - Wall Street is attempting to derail SEC chair Gensler’s agenda by challenging economic assumptions underpinning dozens of policy proposals, WSJ said, arguing that many of the proposals would outstrip the benefits, and that the SEC’s studies of the issues were flawed.


• 
  Morgan Stanley (MS) - Morgan Stanley put banker Charles Leisure on leave as authorities increased inquiries tied to block-trade probe in recent weeks, Bloomberg reported.


• 
  Management Consultancies - McKinsey, Bain, Boston Consulting unveiled one of the biggest rounds of pay rises for new hires in more than two decades, as inflation, booming demand for advice and a tight labour market force the trio of consultancies to compete for talent, FT reported.

CONSUMER STAPLES:

• 
  Ukraine Ags - Exports of grain from Ukraine’s southern ports have surpassed one million metric tons under a UN-brokered deal with Russia that has held up for nearly one month even as hostilities rage elsewhere in the country, WSJ reported.

CONSUMER CYCLICALS:

• 
  Wendy's Company (WEN) - Wendy’s Friday pulled sandwich lettuce in the US Midwest due to E. Coli outbreak, Bloomberg said. The bacterial outbreak hasn’t been linked to specific food; 38 have been hospitalised.


• 
  Next (NXGPY), Joules Group (JOUL) - Next has not received enough financial information to make a formal proposal for Joules, and the two firms are not close to agreeing on a deal, according to Sky News.

REAL ESTATE:

• 
  Zillow Group, Inc. (Z) - Cautious mention in WSJ, which argued that shorting Zillow was the 'best bet' in the housing market this year.

29 Aug 2022 - 09:15- Research Sheet- Source: Newsquawk