US EARLY MORNING: Relief as regulators take steps to protect banking system; may change Fed calculus for March meeting; huge week for US data

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  OVERNIGHT: Over the weekend, US regulators announced measures to backstop the fallout from SVB's collapse, helping soothe some fears on financial stability, and helping to support US equity futures (our recap is here). Overnight, APAC stocks were mixed with financials hit amid the fallout from the SVB collapse and subsequent failure of Signature Bank; shares in Hong Kong were particularly boosted by strength in the tech industry, after China President Xi advocated strengthening science and technology, while China also reported stronger-than-expected loans and financing data, while surprisingly retaining Yi Gang at the head of the PBoC (see our APAC wrap here). European equities start the week around flat; The main story was HSBC's (HSBC) acquisition of Silicon Valley Bank UK Limited for GBP 1.00, where assets and liabilities of the parent companies were excluded from the transaction, and deposits will be protected, with no taxpayer support. HSBC said customers will be able to access their deposits and banking services as normal from today (see here). Nevertheless, financials continued to see some pressure, with some like JPMorgan noting that the sector still faced increased scrutiny.


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  US PRE-MARKETS: US equity futures are rallying, but off overnight highs after a cautious start in Europe. Regulatory responses from authorities in the US and the UK has helped to soothe some of the fears over the health of the banking system. US stocks are seeing greater relief than European counterparts due to the fact that the potential exposure was greater there, but also because this may dovishly change the Fed hikes calculus, with some suggesting that the Fed may even hold off a rate hike on March 22nd due to the financial stability concerns. Much will still depend on the tone of incoming data, as Fed’s Barkin said before the pre-meeting blackout kicked in. And on that theme, this week sees an abundance of inflation metrics out of the US, including the CPI and PPI reports, as well as consumer inflation expectations in Monday’s New York Fed survey, and Friday’s prelim Michigan consumer sentiment data for March; there are also retail sales data due this week – see Day Ahead section below for more.


• NOTE: The US is now on Daylight Saving Time; the time differential between New York and London has therefore been narrowed to four hours until Sunday March 26th, when the usual five-hour time differential will be restored.

DAY AHEAD:

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


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  EUROPEAN DATA/SPEAKERS: It is a thin data docket for the day. No major data is scheduled for release in Europe. BoE’s Dhingra will deliver some remarks after the European close. Eurogroup finance ministers are also meeting today, and commentary around financial stability risks will be in focus. On the supply front, Netherlands will auction EUR 1.5-2.0bln of 2027 DSLs.


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  NORTH AMERICAN DATA/SPEAKERS: February’s employment trends data, and the NY Fed’s monthly survey of consumer expectations will be released.


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  WEEK AHEAD: The week ahead has key macro implications, with the release of many inflation metrics out of the US (Monday sees the release of NY Fed’s consumer inflation expectations survey, Tuesday sees the release of the key CPI data, Wednesday sees the release of PPI data, and on Friday, University of Michigan’s survey contains inflation expectations), while the US will also release retail sales data on Wednesday. While these may be crucial in shaping the Fed’s policy response at its March 22nd FOMC, it is worth noting that some strategists have been suggesting that the significance of the data has been lessened given the jitters around financial stability; Goldman Sachs, for instance, no longer expects the Fed to hike rates at the March meeting, but still expects rate rises in May, June and July. Elsewhere, ECB, China activity data, some UK data are the highlights for the week; our week ahead briefing can be accessed here.

STOCK NEWS:

INDEX:

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  S&P 500 - Insulet Corporation (PODD) to replace SVB Financial Group (SIVB) in S&P 500, effective prior to the opening of trading on Wednesday, March 15th.

FINANCIALS:

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  Banking System - The Treasury has approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank in a manner that fully protects all depositors; depositors will have access to all of their money starting Monday, March 13th, and no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. It announced similar systemic risk exceptions for Signature Bank, which was closed by its state chartering authority; all depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer. Additionally, the Federal Reserve said it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors, adding that the US banking system remains resilient, on a solid foundation; there was no topline number on what will be available in the facility. Full Newsquawk recap and analysis here.


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  Fed Programme - The Fed has introduced a 'Bank Term Funding Programme', which has USD 25bln of funds immediately available, and will allow banks to borrow from the Fed using Treasury bonds as collateral; the bonds will be valued at par.


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  HSBC (HSBC) - The Bank of England facilitated the purchase by HSBC of Silicon Valley Bank UK Limited for GBP 1, where assets and liabilities of the parent companies were excluded from the transaction, and deposits will be protected, with no taxpayer support. HSBC said customers will be able to access their deposits and banking services as normal from today.


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  Coinbase Global, Inc. (COIN) - After regulators closed Signature Bank, Coinbase said it has about USD 240mln in corporate cash balances with Signature Bank.


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  Regional Banks - While many US financial names are rallying in pre-market trade, some regional banks like First Republic Bank and Western Alliance Bancorp are suffering, with continued concerns around their financial health.


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  Big Banks - Barron's put out a positive piece, stating that the dramatic selloff in shares of SVB Financial Group had bank investors on tenterhooks, but it may be a buying opportunity instead, since it is unlikely that the whole banking sector is as vulnerable as SVB—particularly not the larger banks.

COMMUNICATIONS:

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  Meta Platforms, Inc. (META) - As part of a plan for broader cost cuts, Meta is considering different divestiture options for its customer service software company Kustomer, which it acquired for USD 1bln in 2020, Bloomberg reports. No final decision has been made. Separately, the WSJ reports that Meta is planning additional layoffs to be announced in multiple rounds over the coming months, and that in total, it would be roughly the same magnitude as the 13% cut to its workforce last year.


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  Microsoft Corporation (MSFT) - Xbox confirmed to IGN that it will not be on the E3 2023 showfloor, but signaled support for E3's digital week by confirming that it will be co-streaming the event when it kicks off on June 11th.


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  Roku (ROKU) - Said it had total cash and cash equivalents of approximately USD 1.9bln, approximately USD 487mln held at SVB.


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  Roblox (RBLX) - Said the SVB situation would have no impact on its day-to-day operations. Of its USD 3bln of cash and securities balance (end February), approximately 5% was held at Silicon Valley Bank (SIVB).


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  Vimeo (VMEO) - Holds accounts at SVB with a total balance of less than USD 250k.


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  Etsy (ETSY) - Etsy sellers were hit by SVB collapse, and payments were delayed, NY Post reports.

TECH:

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  Semiconductors - The US is working to further tighten restrictions on the export of semiconductor manufacturing gear to China, escalating rules aimed at preventing the country from developing an advanced chip industry, Bloomberg reported. US companies have been briefed on the plan. Biden admin expects to announce the new restrictions as early as next month, the report said. Rules may double the number of machines that require special licenses for export. The report cited Applied Materials (AMAT) as a name that would be specifically impacted.


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  Dell Technologies Inc. (DELL) - Positive mention in Barron's, which said Dell could be Tech’s cheapest stock, but the discount was unlikely to last.


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  Salesforce.com, inc. (CRM) - Constructive mention in Barron's, which said CEO Marc Benioff was fighting to put Salesforce back on top.

INDUSTRIALS:

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  Boeing Company (BA) - FAA Friday said it had cleared the way for Boeing to resume deliveries of its 787 Dreamliners, WSJ reported. FAA said Boeing had addressed its concerns, and that the agency might resume issuing final safety approvals for deliveries as soon as next week, adding that it must still sign off on every plane before Boeing can deliver it. Saudi Public Investment Fund is closing in on a USD 35bln deal for a large number of Boeing commercial jets that will serve in the fleet of a new national airline, WSJ reports.


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  Caterpillar Inc. (CAT) - United Auto Workers union said members at four Caterpillar sites voted in favour of a new six-year contract, thus preventing a strike, Reuters reported. Unionised workers unanimously accepted the deal that outlined a 27% combined wage increase and lump sums over the six-year period, a bump in employer contributions to retirement plans, and a USD 6,000 bonus.


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  Norfolk Southern Corporation (NSC) - Norfolk Southern reached an agreement with two of its labour unions to provide up to seven paid sick days a year to its members.

MATERIALS:

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  LyondellBasell Industries (LYB) - United Steelworkers union claims it was misled by Lyondell about possible buyers for the company’s Houston refinery, which the company has set for permanent closure late this year, Reuters reports. USW said the International Union was approached by buyers who say not only are they willing to buy the refinery at a fair market price, but have been trying to do so since before the closure notice.

ENERGY:

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  ConocoPhillips (COP) - US expected to approve ConocoPhillips Willow oil-drilling project in the Alaskan Arctic, WSJ says. Environmentalists and many Democrats object to the project, but a compromise is expected to be put forward by the Biden administration.

CONSUMER CYCLICAL:

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  Ford Motor Company (F) - Ford is recalling 18 F-150 EV lightning vehicles due to a battery cell manufacturing defect, but added that production was on track to resume today.


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  Ball Corporation (BALL) - President and CEO Daniel W. Fisher was elected as the company Chairman, effective April; John A. Hayes, who has served as chairman since 2013, will not seek re-election to the board.

UTILITIES:

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  Southwest Gas Holdings, Inc. (SWX) - Icahn Enterprises raises stake in Southwest Gas to 12.64% (prev. 9.9%), according to a regulatory filing. The filing allows for activism.

HEALTH CARE:

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  ACADIA Pharmaceuticals Inc. (ACAD) - FDA approves DAYBUE (trofinetide) for the treatment of Rett Syndrome in adult and paediatric patients two years of age and older.


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  GE HealthCare Technologies Inc. (GEHC) - Positive mention in Barron's, which said GE HealthCare stock has had a great start, and more gains lie ahead.


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  Sanofi (SAN FP) - To acquire Provention Bio (PRVB) for USD 25.00/shr (vs. Friday's USD 6.70 close) for a total USD 2.9bln.


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  Novartis (NVS) - Launched new share buyback programme of up to CHF 10bln.


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  Okta, Inc. (OKTA) - Positive mention in Barron's, says the stock has been on a tear, and there is still time to buy.

13 Mar 2023 - 09:00- Research Sheet- Source: Newsquawk