US EARLY MORNING: Index futures stablise after Monday slide; GS banking conference in focus

SNAPSHOT: After Monday’s slide following hawkish ISM Services data, the S&P 500 relinquished its 200dma, falling to the psychological 4,000 mark, and that is roughly where futures have been trading overnight (3998-4014 parameters in European hours). While the strong ISM data is seen to give the Fed the greenlight to continue its hawkish brand of monetary policy, many argued that the bar for the central bank to deviate from that path was high anyway, and ultimately, pricing for the Fed’s December meeting and expectations of the terminal rate were ultimately little changed on the day (still around a 90% chance of a 50bps rate hike next week, and the FFR target peak is still expected to be around the 5% mark). While Treasury yields picked up sharply on Monday, they have been giving back some of that upside overnight, as a cautious risk tone lends a bid to major fixed income; yields are lower across the curve by around 2bps or so. There are not a lot of US-specific macro catalysts before next week’s CPI and FOMC meetings, and that could leave the focus on technicals, positioning, as well as catalysts in other jurisdictions.

BANKS: That said, the banking sector might provide some impetus today, with the Goldman Sachs' financials conference getting underway; some noted the weak tone of financials on Monday – the macro tone contributed much here, but many are still fearful that banks could give a glum outlook. Traders will be attentive to any commentary around the future path of earnings, provisions for losses, as well as commentary on net interest income and net interest margins, as Treasury yields back-off recent highs. Additionally, any comments on the health of the consumer ahead of the key holiday spending season, particularly as credit card delinquencies and charge-off rates have been ticking up as the Fed normalises monetary policy and lifts interest rates sharply.

POSITIONING: Looking at the recent equity rally, Citi said positioning flows were weak last week as markets continued to grind higher, which implies only limited investor conviction behind the recent rally. "S&P futures positioning remains neutral, whereas Nasdaq remains bearish and near unchanged from the week before," Citi says, "overall gross positioning is below average for US indices, and the recent rise has left legacy short positions further in loss with continuing risk of a squeeze." Investors are relatively bearish Nasdaq and EuroStoxx and continue to be a little more bullish European Banks, DAX, FTSE.

DAY AHEAD: US international trade data for October is due, along with the weekly RedBook data (week ending Dec. 3rd). Canadians will see the release of the Ivery PMI and trade balance data for November and October, respectively. Although there is not much on the docket for the day, the EU Finance Ministers meetings are likely to generate some fiscal commentary. The API will release its gauge of weekly energy inventories after the US close. Our full day ahead calendar can be accessed here.

TECH:

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  Apple Inc. (AAPL) - Retail employees at a St. Louis store pushed back on unionisation efforts by the International Association of Machinists & Aerospace Workers, Bloomberg reports; 66 of the store’s 90 employees rejected the IAM, saying they "the majority of employees at this Apple Store do not wish to work with the IAM," and "do not believe a union is required at this time, nor do they wish to work with the IAM in the future."


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  Microsoft Corporation (MSFT) - Almost 300 quality assurance workers at video game studios owned by Microsoft have taken steps towards forming a union, Axios reports; if it succeeds, it’ll be the biggest effort to unionise yet seen in the game industry, the report added.


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  GitLab Inc. (GTLB) - Q3 EPS -0.10 (exp. -0.15), Q3 revenue USD 113mln (exp. 106.1mln), Q3 non-GAAP operating margin improved by around 1,700bps Y/Y, Q3 dollar-based net retention rate of 130%. Sees Q4 EPS -14.5c (exp. -0.17), and sees Q4 revenue between USD 119-120mln (exp. 119.3mln). FY23 EPS seen at -55c (exp. -65c), and FY23 revenue seen between USD 420.5-421.5mln (exp. 413.7mln).

FINANCIALS:

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  Banking Names - Goldman Sachs US Financial Services Conference will take place on Tuesday and Wednesday, where many top tier banks like Goldman Sachs (GS), JPMorgan (JPM) and Citigroup (C) will present. Traders will be eying any guidance ahead of the Q4 earnings season, which gets underway in January.


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  Cboe Global Markets, Inc. (CBOE) - Said that For the fourth straight month, total US options volume reached an all-time high with 313.4mln contracts traded across all four Cboe US options exchanges. Total volume in Mini-S&P 500 Index options surpassed 1.3mln contracts in November, with average daily volume of 66,000 contracts, the highest month since February 2020. Global FX Spot Full Amount ADV reached a new all-time monthly high of USD 15bln.


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  Credit Agricole (CRARY) - Announces an action plan to be carbon neutral by 2050. Is accelerating the advent of renewables and investment and financing in green energy. Strategy will replace fossil fuels. Will provide no new financing of new oil extraction projects.

CRYPTO:

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  Silvergate Capital Corporation (SI) - In a regulatory 8-K filing, CEO said all customers continue to have access to their US dollar deposits when they need them and that the Silvergate Exchange Network has continued to operate uninterrupted throughout this period.

CONSUMER CYCLICAL:

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  GameStop Corp. (GME) - A round of layoffs have begun at GameStop, Axios reports. One source said that the team building GameStop's blockchain wallet was heavily impacted. Exact number of layoffs could not be confirmed, but Axios said that at least six software engineers have claimed on LinkedIn to have been let go.


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  EssilorLuxottica (ESLOY) - EssilorLuxottica and Swarovski announce a 10-year licensing agreement.

CONSUMER STAPLES:

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  Keurig Dr Pepper Inc. (KDP) - Reiterates its FY22 outlook for adj. EPS growth in the mid-single digits (exp. 1.69), and reiterates its FY22 outlook for net sales growth on a FXN basis in the low-double digits (exp. 14.04bln).


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  PepsiCo, Inc. (PEP) - PepsiCo is laying off hundreds of workers at the HQ of its North American snacks and beverages divisions, WSJ reports, adding that it was a signal that corporate belt-tightening is extending beyond tech and media. Pepsi reportedly said that the lay offs were "to simplify the organisation" so it "can operate more efficiently."


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  Herbalife Nutrition Ltd. (HLF) - Fell 10% afterhours on news that it would offer USD 250mln aggregate principal amount of convertible senior notes due 2028 in a private offering. Will use proceeds to repurchase a portion of the company's existing 2.625% convertible senior notes due 2024 from a limited number of holders in privately negotiated transactions.

MATERIALS:

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  Metal Names - US aluminium and steel producers climbed in extended trading on news that the US and EU are weighing new tariffs on Chinese steel and aluminium as part of a bid to fight carbon emissions and global overcapacity, Bloomberg reports, adding that the move would be a novel approach since the two would be using tariffs to further their climate agenda. BBG said the US idea was still in an initial phase, and hasn’t been formally proposed. An agreement with the EU isn’t likely until late next year at the earliest.

HEALTH CARE:

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  Neuralink, Tesla, Inc. (TSLA), Twitter - Elon Musk’s medical device company Neuralink is under federal investigation for potential animal-welfare violations, Reuters reports.


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  Fresenius Medical Care AG (FMS) - CEO Carla Kriwet to be replaced after just two months in the role due to "strategic differences," Bloomberg said; CFO Helen Giza will become CEO and will also remain CFO role until further notice.

COMMUNICATIONS:

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  News Corporation (NWS, NWSA), Fox Corporation (FOXA) - News Corporation special committee to explore a potential combination with Fox Corporation.


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  Vodafone (VOD) - Xavier Niel, who owns a 2.5% stake, says the changing of CEO only makes sense if Vodafone has a clear roadmap from the board; calls for the telecoms giant to streamline and offload parts of the business to cut debt, The Times reports.

INDUSTRIALS:

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  Textron Inc. (TXT) - Textron's Bell V-280 Valor was chosen as US Army long-range assault aircraft; Jefferies estimates that it could add USD 11 to TXT's net present value, with the deal adding USD 66bln of revenue through 2050.


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  TuSimple (TSP), Navistar (NAV) - The two announced an end to their co-development under the 2020 Joint Development Agreement. The decision to end the development agreement does not preclude the companies from working together in the future.

06 Dec 2022 - 09:21- Fixed IncomeData- Source: Newsquawk