US EARLY MORNING: Stock futures are languishing after sticky CPI data and Fedspeak; retail sales ahead

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  OVERNIGHT: Equities were mixed on Wall Street after a 'mixed' CPI report for January and amid Fedspeak (see here). The APAC session saw stocks mostly lower after the choppy lead from the US, while local traders also were focussed on a heavy earnings slate; RBA Governor Lowe reiterated that further rate hikes would be forthcoming, while the PBoC boosted funds through its Medium-term Lending Facility at an unchanged rate (see here). European equities started the midweek session on a mixed footing amid corporate earnings updates, and the lingering hawkishness from the US on Tuesday (see here); inflation data out of the UK was lower than expected, and saw some paring back of market implied expectations of BoE hawkishness (see Day Ahead section below for our data review).


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  US-PREMARKETS: Equity futures are languishing in US pre-market trade; analysts are citing the CPI report for January, which alludes to sticky inflation in the US, and has resulted in a hawkish repricing of the market’s anticipated trajectory for the Federal Funds Rate. Money markets now see the Fed lifting rates to a peak of 5.26% (which implies a 4% chance that the FFR target range will be lifted to 5.25-5.50%) – a more hawkish level than the central bank’s most recent SEPs, which projected a peak between 5.00-5.25%. Additionally, money markets have completely priced-out the prospect for any rate cuts in 2023, previously having retained some possibility that the Fed would pivot later this year as inflation comes under control and growth slows. Yields along the Treasury curve are currently lower by around 1-2bps, and the curve is moderately steepening after the flattening seen on Tuesday. The dollar Index is a little higher (above 103.50). Crude futures are on the back foot, in keeping with the risk mood, but also after API data reportedly showed a significantly higher-than-expected inventory build in the week; the DoE’s gauge will be out later today.

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Eurozone industrial production is expected to slip in December. ECB President Lagarde will present the central bank's 2022 Annual Report to the European Parliament, where she will give an overview of the actions the central bank has taken in the last year.


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  NORTH AMERICAN DATA/SPEAKERS: There are a few key items on the US data slate: retail sales data for January are expected to post a rise in the month, rebounding from December’s downside. We will also see the release of US industrial and manufacturing production for January, which are likely to show sequential improvements vs December. The Empire Fed manufacturing survey for February will help to form initial expectations of what the ISM manufacturing data (released on March 1st) will look like. Elsewhere, business inventories data for December is due. The CBO will release updated budget and economic projections in the afternoon. Towards the close, TIC flows data for December will be released. From Canada, manufacturing sales and wholesale trade data is out in the pre-markets. There is no scheduled Fedspeak on Wednesday.


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  SUPPLY: On the supply front, Germany will auction EUR 2.5bln of 2048 and 2052 debt, while the US will auction USD 15bln of 20yr Bonds. Click here for our G7 daily bond auction note.


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  ENERGY: The API’s weekly inventory report was said to have shown headline crude stocks +10.5mln (exp. +1.1mln), Cushing +2mln, gasoline +0.8mln (exp. +1.5mln), distillates +1.7mln (exp. +0.4mln). Elsewhere, WTI March 2023 options will expire today.


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  CORPORATE EARNINGS: Major US Corporate earnings due today include: Cisco (CSCO), Nutrien (NTR), Kraft Heinz (KHC), Zillow (ZG), Barrick Gold (GOLD), Biogen (BIIB), Analog Devices (ADI), Marathon Oil (MRO), Shopify (SHOP). Click here for our Daily US earnings estimates note.


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  UK INFLATION REVIEW: Data out of the UK today showed consumer prices falling 0.6% M/M in January, a deeper-than-expected fall vs the -0.4% M/M that analysts were predicting. That saw the annual measure fall from 10.5% Y/Y in December to 10.1% Y/Y in January (exp. 10.3%), while the core rate of CPI eased to 5.8% Y/Y (exp. 6.2%, prev. 6.3%). Capital Economics said the data showed that disinflationary pressures were building and broadening, pointing out that it was the easing in services inflation that will do the most to reassure the Bank of England that inflation is moderating as it had hoped. "This suggests that the end of the Bank of England’s tightening cycle just got a bit closer," it said. In wake of the data, when UK markets opened, implied probability for a BoE rate hike of 25bps at its March meeting fell from around 89% to 66%.

STOCK SPECIFIC NEWS:

COMMUNICATIONS:

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  Airbnb, Inc. (ABNB) - Q4 EPS 0.48 (exp. 0.25), Q4 revenue USD 1.90bln (exp. 1.86bln), Q4 Gross Bookings Value +20% Y/Y at USD 13.5bln (exp. 13.5bln), Q4 Nights and Experiences Booked +20% Y/Y at 88.2mln (exp. 90.1mln). Exec said guest demand remained strong throughout 2022, all regions saw significant growth, supply growth was also strong. Ended 2022 with 6.6mln global active listings (+900k more listings vs the start of the year) ex-China. Said it was seeing strong demand in Q1, indicating that consumer confidence to travel remains high. Is particularly encouraged by European guests booking their summer travel earlier this year. Sees Q1 Nights and Experiences Booked to be nearly as strong as Q4 Y/Y, anticipates slightly lower ADR Y/Y; ADR to face increasing downward pressure from mix shift in the near-term, as well as new and improved pricing and discounting tools. Q1 revenue seen between USD 1.75-1.82bln (exp. 1.69bln).


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  Meta Platforms, Inc. (META) - Announced that from March 16th, users will no longer be able to tag products in live broadcasts on Instagram. The change will apparently help it to focus on products and features that provide the most value to its users.


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  TripAdvisor, Inc. (TRIP) - Q4 adj. EPS 0.16 (exp. 0.04), and Q4 revenue USD 354mln (exp. 343.9mln). Said its 2023 focus will be on growing its restaurant and diner base, and will test different pricing options.

TECH:

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  Akamai Technologies, Inc. (AKAM) - Q4 adj. EPS USD 1.37 (exp. 1.27), Q4 revenue USD 928mln (exp. 904.8mln). Exec noted the challenging macro environment, and said it was taking several actions to reduce costs, and is re-tasking 1,000 (10% of its workforce). Margins will remain slightly under 30% in the near term. Q1 EPS seen between USD 1.30-1.34 (exp. 1.33), and Q1 revenue seen between USD 900-950mln (exp. 917.4mln). FY23 EPS is seen between 5.40-5.60 (exp. 5.59), and FY23 revenue between USD 3.7-3.78bln (exp. 3.7bln).


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  Analog Devices, Inc. (ADI) - Raises quarterly dividend +13% to 0.86/shr.


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  GoDaddy Inc. (GDDY) - Q4 EPS 0.60 (exp. 0.62), Q4 revenue USD 1.04bln (exp. 1.04bln). Announced a restructuring plan to drive over USD 100mln in annual cost savings; will reduce workforce; expects related charges between USD 55-65mln, which will be recorded in H1. Q1 revenue seen between USD 1.03-1.05bln (exp. 1.05bln). FY23 revenue expected between USD 4.25-4.325bln (exp. 4.35bln).


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  ASML (ASML) - Said new China export controls would not have a material impact this year. Elsewhere, a ex-employee in China misappropriated chip data, Bloomberg reports.


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  Sandvik (SDVKY) - To supply SEK 370mln worth of battery EVs to Norway’s Rana Gruber.

FINANCIALS:

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  Barclays (BCS) - Annual profits fell over trading error, while IB revenues disappointed; Q4 revenue GBP 5.80bln (exp. 5.96bln), Q4 CIB revenue GBP 2.58bln (exp. 2.77bln), Q4 Consumer, Cards, and Payment revenue GBP 1.29bln (exp. 1.3bln), Q4 NII GBP 2.74bln (exp. 3.09bln). Announced a GBP 500mln share buyback programme. It is also reportedly pulling back a large share of its GBP 2.5bln consumer lending operations. Barclays will stop lending through all retailers except Amazon (AMZN) and Apple (AAPL) from the end of March, The Times reports, adding that the winding down was due to an outdated technology platform, with lending suspended until it develops a replacement.


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  Crypto Names - Senator Elizabeth Warren is building an anti-crypto army, Politico reports, and she is being backed by some conservatives. the report said Warren was zeroing in on national security concerns as her focus for potential crypto legislation, even as she raises red flags about a host of issues in the space, from consumer protections to environmental impact.


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  Upstart Holdings, Inc. (UPST) - Q4 adj. EPS -0.25 (exp. -0.47), Q4 revenue USD 147mln (exp. 133.6mln). Exec noted economic headwinds in 2022 and continued funding challenges which impacted financial results. Sees Q1 revenue about USD 100mln (exp. 158mln), and sees Q1 net loss of approximately USD -145mln.


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  Deutsche Bank (DB) - The German bank has cut ties with property developer Rene Benko over corruption concerns.

CONSUMER:

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  Kering (PPRUY) - Revenue misses expectations, Gucci sales down 14%, but said start of 2023 was encouraging in China. Q2 revenue EUR 5.28bln (exp. 5.50bln); Q2 group comp revenue -7.0% (exp. -1.5%); Gucci comp revenues -14% (exp. -9.9%). Aims for further profitable growth in 2023 despite macro uncertainty. CFO says the start of 2023 was encouraging in China, whilst Balenciaga sales were still hit in the US in January.


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  Herbalife Nutrition Ltd. (HLF) - Q4 adj. EPS 0.53 (exp. 0.32), Q4 revenue USD 1.2bln (exp. 1.13bln). The multi-level marketing corporation said it was not providing FY23 guidance given the rapidly shifting macroeconomic sentiment and backdrop, and increased volatility in the market. It will periodically reassess its ability to provide guidance when it believes future performance can be reasonably estimated.


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  Udemy, Inc. (UDMY) - Q4 EPS -0.36 (exp. 0.23), Q4 revenue USD 165.3mln (exp. 166mln). Will reduce workforce by 10%. Q1 revenue seen between USD 168-172mln (exp. 186.8mln). FY23 revenue seen between USD 700-730mln (exp. 777.3mln).


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  Carrefour S.A. (CRRFY) - Sales and LFL topped expectations in Q4, sees further profit growth this year, also expects customers to continue trading down amid high inflation.


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  Heineken N.V. (HEINY) - Profits top expectations on Asia recovery. FY22 revenue EUR 28.69bln (exp. 28.22bln), FY adj. operating profit EUR 4.50bln (exp. 4.41bln). Organic Beer Volume +6.9% (exp. +6.8%). Full year 2023 outlook unchanged. Exec said it will continue the discipline to price responsibly, anticipates increase in input costs in the high teens per hectolitre and significantly higher energy costs, particularly in Europe.

MATERIALS:

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  Glencore (GLNCY) - Will return USD 7.1bln to shareholders after trading profits rise to record high in 2022. FY22 revenue USD 256bln (exp. 265bln), FY adj. EBIT USD 26.7bln (exp. 27.4bln), FY EPS 1.33 (prev. 0.38 Y/Y). Launched a USD 1.5bln share buyback, plans a USD 0.40/shr base cash distribution, and an additional USD 500mln “top-up” cash distribution. Exec said high inflation rates and associated tighter monetary conditions present some risk to the economic outlook in 2023. China’s reopening, however, together with a continued global focus on energy security and decarbonisation/electrification, means that demand for many of its commodities is likely to remain healthy, while supply constraints persist and inventories remain relatively low.

INDUSTRIALS:

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  Airbus (EADSY) - The European industrial powerhouse reportedly plans to boost production rates of its two biggest models as it tries to capitalise on resurgent demand for long-haul travel, WSJ reports.


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  BAE Systems (BAESY) - Awarded a USD 466mln US contract modification.


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  Virgin Orbit Holdings, Inc. (VORB) - Virgin Orbit said its failed January 9th mission, the first orbital attempt ever to take off from UK soil, failed due to a wandering fuel filter.

ENERGY:

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  Devon Energy Corporation (DVN) - Q4 EPS 1.66 (exp. 1.75), Q4 revenue USD 4.3bln (exp. 4.39bln). Q4 oil production reached all-time high of 316k BPD. Board approved an increase in its fixed dividend +11%. Sees Q1 total oil equivalent production between 625-645mln BOEPD, and sees FY23 total oil equivalent production 643-663mln BOEPD (exp. 663k). Sees Q1 CapEx at USD 3.7bln (exp. 3.4bln).

HEALTH CARE:

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  HealthEquity, Inc. (HQY) - HealthEquity exec said record-setting sales year it saw means that it expects to reach the top-end of previously provided ranges for revenue and earnings, including revenue of approximately USD 860mln.

QUARTERLY 13F FILINGS - HIGHLIGHTS:

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  Appaloosa Management 13F - In the quarter, added Aptiv (APTV), Caesars Entertainment (CZR), Disney (DIS). Exited Mosaic (MOS). Increased stakes in Alibaba Group (BABA), Chesapeake Energy (CHK), HCA Healthcare (HCA), Salesforce (CRM), Uber Technologies (UBER). Reduced holdings in Constellation Energy (CEG), Enterprise Products Partners (EPD), Meta Platforms (META), Sysco (SYY).


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  Berkshire Hathaway Inc. (BRK-B) 13F - In the quarter, it raised holdings in Apple (AAPL), Louisiana-Pacific (LPX), Paramount (PARA). Decreased holdings in TSMC (TSM), Activision Blizzard (ATVI), Ally Financial (ALLY), BNY Mellon (BK), Chevron (CVX), Kroger (KR), McKesson (MCK), US Bancorp (USB).


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  Elliott Management 13F - In the quarter, added iShares iBoxx High Yield Corporate Bond ETF (HYG), Liberty Broadband Class C (LBRDK), News Corp (NWSA) , NiSource (NI), SPDR Bloomberg High Yield Bond ETF (JNK). Raised stakes in E2open (ETWO), Pinterest (PINS), Triple Flag Precious Metals (TFPM). Lowered stakes in Aerojet (AJRD), Howmet (HWM), Peabody Energy (BTU), Polestar Automotive (PSNY), Uniti Group (UNIT).


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  Greenlight Capital 13F - In the quarter, it added Coya Therapeutics (COYA), Funko (FNKO), Gulfport Energy (GPOR), Tenet (THC). Exited Intel (INTC), News Corp. Class B (NWS), Rivian (RIVN). Raised stakes in Civitas (CIVI), Global Payments (GPN), Kyndryl (KD), Southwestern Energy (SWN), Teck Resources (TECK). Lowered stakes in CNX Resources (CNX), GoPro (GPRO), Resideo (REZI), SPDR Gold Shares (GLD), Victoria's Secret (VSCO).


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  Icahn Capital 13F - In the quarter, raised stakes in Crown Holdings (CCK), Icahn Enterprises (IEP). Reduced stake in Cheniere Energy (LNG), Herc Holdings (HRI).


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  Paulson & Co. 13F - In the quarter, it exited APA Corp. (APA), Barrick Gold (GOLD), Rumble (RUM), VMWare (VMW). Lowered stakes in Agnico Eagle Mines (AEM), Horizon Therapeutics (HZNP), Overseas Shipholding (OSG), SSR Mining (SSRM), Thryv Holdings (THRY).


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  Third Point 13F - In the quarter, it added AIG (AIG), Fidelity National Information Services (FIS), International Flavors & Fragrances (IFF), LabCorp (LH), Microsoft (MSFT). Exited Cano Health (CANO), CSX (CSX), EQT Corp. (EQT), Range Resources (RRC), T-Mobile (TMUS). Raised stakes in Bath & Body Works (BBWI), DuPont (DD), iShares 1-3 Year Treasury Bond ETF (SHY), TJX (TJX). Lowered stakes in Disney (DIS), PG&E (PCG), Ventyx Bio (VTYX).


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  Trian Fund Management 13F - In the quarter, it added Disney (DIS). Exits P&G (PG). Raised stake in General Electric (GE). Lowered stake in Sysco (SYY).

15 Feb 2023 - 09:31- Research Sheet- Source: Newsquawk