US EARLY MORNING: US equity futures a touch better than flat; PPI data to provide further inflation signals today

US PREMARKETS: US equity futures are trading slightly higher, Treasury yields are rising with the curve moderately bear-steepening, the Dollar Index is mildly pressured, while crude futures are trading with slight gains. Cooling inflation dynamics briefly supported US equities on Thursday, and traders will get a look at another proxy of price pressures today, with the release of PPI data for the month (also expected to show an annual cooling). However, the equity upside did not stick; analysts reasoned that the data does not provide any significant change of narrative to bake into implied pricing for the Fed's rate trajectory (money markets are pricing rates are already at terminal, and expect rate cuts to begin in Q1 2024). Additionally, weekly initial jobless claims data jumped above expectations in the week, and although it can be a choppy series, highlights market (and official) expectations that the labour market will begin loosening in the months ahead, and that will slow economic growth, which will eventually lead to the Fed having to dial down hawkishness in order to support the economy. Next week's FOMC meeting minutes will provide a gauge on how officials are prioritising this debate, particularly in the context of some Fed participants now suggesting that rates are in a good place.

WEEKLY FLOWS: BofA's weekly flow report noted USD 20.5bln inflows into cash, USD 6.9bln inflows into bonds, USD 1.5bln into stocks, USD 700mln out of from gold. Its Bull/Bear indicator remains at 4.1. The bank said hedge fund positioning was most bullish since December 2022, while long-only funds remian bearish. In terms of the specifics, US equities saw outflow of USD 1.6bln in the week, the first outflow in the last three weeks; Japan equities saw inflows of USD 2.5bln, and has now seen inflows for the last two weeks; Europe equities saw outflow of USD 3.5bln in the week, marking 22 weeks of outflows; while EM equities have now seen inflows for the last five weeks, with USD 6.0bln in the latest week. In fixed income, government bonds saw inflows of USD 4.4bln in the week, marking 26 weeks of inflows; HY bonds saw outflow of USD 4.0bln (outflows now seen for three weeks), while EM debt saw outflows of USD 1.2bln (outflows in the past two weeks). TIPS funds saw outflows of USD 16mln (outflows in the past 2 weeks), while munis saw inflows of USD 1bln, resuming inflows. 

TODAY’S AGENDA:

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


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  EUROPE: After the UK pre-market data dump, the docket for European releases is thin on Friday. On the CRA slate, Moody's may review Germany's Sovereign Debt Rating (currently Aaa), while S&P may review Switzerland's rating (AAA).


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  NORTH AMERICA: PPI data for July is expected to show core producer prices easing slightly on an annual basis. Prelim University of Michigan sentiment data will likely be little changed at the headline level, but traders will be watching the inflation expectations components after data on Thursday showed US CPI core consumer prices rising at a moderate pace, marking the smallest back-to-back monthly gains in more than two years.


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  ENERGY: IEA's monthly energy report will be published; OPEC MOMR on Thursday noted that OPEC production fell to 27.31mln BPD in July, as a result of Saudi Arabia delivering on its 1mln BPD voluntary production cut, while Libya and Nigeria also saw production declines. Elsewhere, Baker Hughes weekly rig count data will be out in the afternoon.

EQUITY NEWS:

TECH:

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  US-China - President Biden stopped some US tech investments in China to safeguard national security, and US investors are concerned that China might respond in kind or reduce purchases of American tech, Reuters said. Investors seem less concerned about the initial impact, more about potential retaliation. China's response remains uncertain, with analysts divided on its likely intensity.


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  Microsoft (MSFT) - A US advisory panel will investigate risks in cloud computing, including Microsoft's role in a recent breach of government officials' email accounts by suspected Chinese hackers, Bloomberg reports. The group will explore risks in cloud infrastructure, prompted by the Microsoft breach.


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  Maxeon Solar Technologies (MAXN) - Fell 24% afterhours. Q2 EPS -0.03 (exp. -0.08), Q2 revenue USD 348.4mln (exp. 372.6mln). Exec said the global demand environment in the distributed generation market weakened significantly in late-Q2 due to the combined effect of higher interest rates, the impact of policy disruption in California, and significant channel inventory industry-wide. Expects challenging market conditions to persist at least through Q3. Sees Q3 revenue between USD 280-320mln (exp. 395.3mln), and sees FY23 revenue between USD 1.25-1.35bln (exp. 1.51bln).


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  Viavi Solutions (VIAV) - Fell 0.7% afterhours. Q4 adj. EPS 0.10 (exp. 0.08), Q4 revenue USD 263.6mln (exp. 263.6mln). Exec said that it saw initial signs of stabilisation and gradual recovery in Q4, some service providers begun to free up funds for network maintenance and optimisation; expects stabilisation and recovery momentum to continue. Sees Q1 EPS between USD 0.09-0.11 (exp. 0.12), and sees Q1 revenue between USD 240-260mln (exp. 268.5mln).

COMMUNICATIONS:

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  News Corp. (NWS) - Fell 0.8% afterhours following results showed profits were down 75%. Q4 EPS 0.14 (Exp. 0.08), Q4 revenue USD 2.43bln (exp. 2.49bln). Exec said results showed marked improvement in H2 with inflation abating, interest rates plateauing and incipient signs of stability in the housing market, we have sound reasons for optimism about the coming quarters. Said digital momentum is gathering pace in the age of generative AI, which presents an opportunity to create a new streams of revenues, while allowing it to reduce costs.


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  Media Stocks - After a 100-day strike by writers that has severely affected the entertainment industry, the Writers Guild of America and Hollywood studios will meet for negotiations on Friday, CNN reports, adding that studios will respond to the writers' proposals.


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  Warner Bros. Discovery (WBD) - Broadcast station owners like Scripps, Nexstar, Sinclair, and Gray are interested in getting rights to show local NBA, NHL, and MLB games, CNBC reports. The rights might be available due to Diamond Sports' bankruptcy or Warner Bros. Discovery's exit from the business, it added. Pay TV providers are also exploring alternatives as regional sports networks decline.

CONSUMER:

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  Amazon (AMZN) - Amazon is getting rid of most of its private clothing brands, keeping only a few like Amazon Essentials, to save money and deal with antitrust concerns, Reuters reports.


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  Capri Holdings (CPRI), Tapestry (TPR) - Q1 adj. EPS 0.74 (exp. 0.71), Q1 revenue USD 1.229bln (exp. 1.2bln). Said the planned acquisition of Capri Holdings by Tapestry marks a major milestone, adding that by joining with Tapestry, CPRI will have greater resources and capabilities to accelerate its global expansion. Given the planned acquisition, CPRI does not intend to provide financial guidance, and withdraws previously issued guidance.


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  Ford (F) - Learned from supplier a vulnerability in the Wi-Fi software driver supplied for use in the sync 3 infotainment system available; to date, have seen no evidence that vulnerability has been exploited.


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  General Motors (GM) - California approved Waymo and GM's Cruise to offer paid rides in their self-driving cars 24/7 in San Francisco, despite opposition, establishing the city as a major hub for self-driving technology, Reuters reports.


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  Flowers Foods (FLO) - Added 3.0% afterhours; Q2 adj. EPS 0.33 (exp. 0.28), Q2 revenue USD 1.23bln (exp. 1.2bln). Exec said consumers continue to seek value, though we are seeing some early indications that they may be acclimating to higher prices and reverting toward prior purchasing behaviour. Lifts FY23 adj. EBITDA outlook to between USD 503-528mln (prev. saw USD 494-528mln), and lifts its FY23 adj. EPS outlook to between USD 1.18-1.25 (exp. 1.19, prev. 1.15-1.25), and also lifts its FY23 revenue outlook to USD 5.095-5.141bln (exp. 5.1bln, prev. 5.086-5.141bln.            Chief sales officer D. Keith Wheeler will retire from the company in August.


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  MercadoLibre (MELI) - MercadoLibre appoints Martin de los Santos as its new CFO; current CFO Pedro Arnt will leave his position to pursue new opportunities outside the company.

HEALTHCARE:

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  Opioid Settlement - The US Supreme Court stopped a bankruptcy deal for Purdue Pharma, the company behind OxyContin. This deal would have protected the Sackler family from more lawsuits about the opioid crisis and limited their liability to USD 6bln, NYT reports. The court will decide in December if this deal is allowed.


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  Cano Health (CANO) - Tumbled 50% afterhours following disappointing results, and news that the company is exiting operations in several markets and is pursuing sales process. Q2 EPS -0.51 (exp. -0.12), Q2 revenue USD 766.7mln (exp. 828.4mln). Believes that its liquidity is not sufficient to cover the company's operating, investing and financing uses for the next 12 months, and management has substantial doubt about the company's ability to continue as a going concern. Withdraws guidance.

ENERGY:

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  Chevron (CVX) - Australia's Fair Work Commission said a workers' union can ask Chevron employees if they want to strike at LNG facilities in Australia over pay and conditions. The strikes could affect LNG exports and triggered fears of a fresh global energy shock, as gas companies were warned to tread carefully dealing with unions linked to the Albanese government, The Australian reported. Separately, Chevron will put money into eco-friendly projects in Australia, MarketWatch reports. The energy company will support a project that stores carbon in soil and work with a university on trapping CO2 in wetlands.

FINANCIALS:

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  KKR & Co (KKR), Telecom Italia (TIIAY) - KKR made a deal with Italy to include the government in its USD 25.3bln bid for Telecom Italia's network, Bloomberg reported. Italy aims to keep some control over this strategic asset and might gain up to 20% ownership through the agreement. The government will have influence in shaping the network's strategic decisions according to the terms of the offer.


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  UBS Group (UBS) - The Swiss bank will not need to tap the government's CHF 9bln backstop agreed as part of the state-sponsored takeover of Credit Suisse, Reuters reports.


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  US Bancorp (USB) - CFO and Vice Chair Terrance Dolan sold 26k shares on August 8th at USD 39.753/shr.


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  AllianceBernstein (AB) - Preliminary end-July AUM USD 704bln (vs 692bln at end-June); increase driven by market appreciation, offset by firmwide net outflows.

11 Aug 2023 - 09:30- Fixed IncomeData- Source: Newsquawk