US EARLY MORNING: US equity futures are about flat following Thursday's rout; next week's CPI and retail sales data comes into focus

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  OVERNIGHT: Wall Street turned around early gains and slumped to losses amid risk off trading conditions, and the yield curve inversion deepened (see here). And Asian stocks traded mostly lower after the downbeat lead from US peers (see here). Wall Street turned around early gains and slumped to losses amid risk off trading conditions, and the yield curve inversion deepened (see here). And Asian stocks traded mostly lower after the downbeat lead from US peers (see here). The European start was downbeat (see here), following negative leads from Wall Street and Asia trading mostly lower; there was slightly better than expected GDP data out of the UK (see below), while traders were also digesting a Nikkei report that said the government will next week likely nominate Kazuo Ueda as the new BoJ Governor, who is considered to be more hawkish than the widely touted current BoJ Deputy Governor Amamiya, who apparently refused the job (see here).


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  US PRE-MARKETS SNAPSHOT: The E-Mini S&P 500 is trading around unchanged, but is on course to close out the week in the red after two weeks of gains. Hawkish policymaker rhetoric was cited this week, and traders are accordingly shifting their focus onto next week’s CPI and retail sales data, which may provide the next catalyst for how Fed pricing will evolve into the March 22nd meeting; we have provided brief previews for these releases below. Treasury yields are little changed on Friday, while the Dollar Index is lower after JPY surged on reports a hawkish candidate was being proposed for the BoJ’s top job (see the above section). Meanwhile, crude futures are surging after Russian Deputy PM Novak said Russia was to voluntarily cut crude production by 500k BPD in March (see here). Ahead, the data docket, speakers slate, and major corporate earnings reports are thin; the prelim University of Michigan data will be eyed, where small improvement is expected to the headline, but traders will be paying close attention to the inflation sub-indices.


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  WEEKLY FLOWS: BofA's weekly flow report (week to Wed 8th) reported that stocks saw USD 7.4bln of outflows, bonds saw USD 7.4bln of inflows, and USD 10.1bln went out of cash; the bank said private clients were allocating to bonds over stocks. Within equities, USD 7.7bln of outflows were reported in the US (first outflow in 3 weeks), USD 0.7bln out of Europe (first outflow in 4 weeks), and USD 1.1bln out of Japan (third consecutive week); EM equities saw USD 1.3bln of outflows (first in 8 weeks). By style, large caps saw USD 8.5bln of outflows, and USD 1.7bln went into small caps. By sector, USD 1.1bln went into financials, USD 1bln into tech, USD 1.2bln of out energy, USD 1.1bln out of healthcare.

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: EU leaders will be holding a second day of discussions on the US Inflation Reduction Act. The ECB will publish repayment data for the TLTRO.III, which is expected to be around EUR 447bln; analysts will be keeping an eye on whether the new ceiling on remuneration will have any impact on bank's desire to repay early or not (though it is effective from May). ECB’s Schnabel will be conducting a Q&A on Twitter, but we don’t expect her to add anything incremental to recent remarks; she has recently expressed concern that inflation will remain too high in the medium-term, and the momentum of price pressures remains elevated, leaving her unable to give an all clear just yet. The Bank of England’s Chief Economist Pill has spoken heavily in wake of the MPR, so we are not expecting anything majorly incremental from him when he delivers remarks. After hours, Moody’s may review Germany ratings (AAA), and S&P may review Swiss ratings (AAA).


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  NORTH AMERICAN DATA/SPEAKERS: The data highlight is the prelim University of Michigan sentiment data for February, where the headline and expectations components are expected to register slight improvement, although the current conditions measure is seen a little lower; as has been the case for many months, traders will closely be watching the inflation gauges within the data. Fed Governor Waller will give another set of remarks; earlier in the week, he said the Fed’s job on inflation was not done yet, and it might be a long fight, with rates possibly staying higher for longer than many expect. Fed 2023 voter Harker will speak, but is talking about digital currencies, so is unlikely to have any specific comments on current policy or outlook. Elsewhere, the weekly Baker Hughes rig count data will be published. The Loonie watchers will be eying Canada’s January jobs data, where the pace of employment additions are expected to cool and the jobless rate is seen ticking up slightly.


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  CORPORATE EARNINGS: There are no major US corporate earnings due Friday. Full earnings expectations can be accessed here.


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  NEXT WEEK - US CPI (14/Feb): Headline consumer prices are expected to rise +0.5% M/M in January (prev. -0.1%), with the annual rate paring to 6.2% Y/Y from 6.5% in December. The headline will be underpinned by a small rise in energy prices and persistent strength in food inflation, Credit Suisse says, though the sharp fall in used vehicle prices seen in recent months is unlikely to persist. For the core measure, core CPI is likely to have risen by +0.4% M/M, picking up from the +0.3% pace seen in December; the annual core measure is seen easing to 5.5% Y/Y in January from 5.7% previously. Credit Suisse says goods prices continue to face headwinds, but the pace of decline is likely to moderate; services inflation will continue to be supported by shelter, which the bank sees remaining remain elevated for at least a few months before decelerating in H2. CS is in line with the market consensus, and says that if this is realised, it would be consistent with inflation eventually returning to 2%, "but any reacceleration in the monthly run rate for core CPI would be an unwelcome development for the FOMC," adding that "combined with January’s strong employment report, this woul likely keep Fed rhetoric hawkish, emphasising the need for ongoing rate hikes and a low probability of a pivot toward easing this year."


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  NEXT WEEK - US RETAIL SALES (15/Feb): The headline rate of retail sales is expected to rise +0.9% M/M in January, paring back some of December's -1.1% decline. The core measure of retail sales is expected to be a more subdued +0.4% M/M (prev. -1.1%), alhtough the Retail Control group is seen falling -0.3% M/M in January after -0.7% in December. "Retail sales will come in hot to start 2023, likely increasing by well over 1% after a weak reading in December," Moody's Analytics said, "a surge in vehicle sales will account for about half of the headline gain, while higher gasoline prices relative to a month prior will also provide a boost."


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  UK GDP REVIEW: UK GDP was softer than expected in December, printing -0.5% M/M (exp. -0.3%). ONS said some of the downside in December was attributable to industrial action. The annual change was -0.1% Y/Y, slightly better than the expected -0.2%. The economy saw no growth or contraction in Q4 (BoE was forecasting +0.1%), which means that the UK avoided falling into a recession, by the technical definition at least. Capital Economics said the breakdown suggests households and businesses were resilient, stating that “it seems as though the combination of the government’s support and households/businesses using their cash reserves has so far cushioned the blow from the fall in real incomes.” But Capital Economics warned that avoiding a UK recession in 2023 will prove to be more challenging: “given that the drags from high inflation and high interest rates are very large (and we estimate that only one third of the drag from higher rates has been felt so far), we still think the economy will enter a recession this year.”

STOCK SPECIFIC NEWS:

TECH:

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  Taiwan Semiconductor Manufacturing Company Limited (TSM) - January sales TWD 200.05bln (around USD 6.64bln) vs TWD 172.2bln Y/Y.


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  Intel Corporation (INTC) - The chipmaker is mulling a significant increase in its existing USD 1.5bln investment in Vietnam to expand its chip testing and packaging plant in the Southeast Asian nation, Reuters reports. The possible move could be worth about USD 1bln; move would signal a growing role for Vietnam as companies push to cut reliance on China and Taiwan because of political risks and trade tensions, the report adds.


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  Lyft Inc (LYFT) - Tumbled afterhours on soft guidance. Q4 EPS -0.74 (exp. 0.13), Q4 revenue USD 1.18bln (exp. 1.16bln), Q4 adj. EBITDA USD 126.7mln excluding the impact from the increase to insurance reserves and accrued liabilities, Q4 adj. EBITDA -248.3mln (prev. -47.6m Y/Y), Q4 adjusted net loss USD 270.8mln (prev. -90.2m Y/Y). Sees Q1 revenue about USD 975mln (exp. 1.09bln). Sees Q1 adjusted EBITDA USD 5mln-15mln. CFO said Q1 guidance reflects cold weather, and a slight base price cut in order to stay competitive.


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  Cloudflare, Inc. (NET) - Q4 adj. EPS 0.06 (exp. 0.04), Q4 revenue USD 274.7mln (exp. 274mln). Sees Q1 adj. EPS 0.03-0.04 (exp. 0.03), and sees Q1 revenue between USD 290-291mln (exp. 290.8mln). For the FY23, sees adj. EPS between USD 0.15-0.16 (exp. 0.15), and sees FY23 revenue between USD 1.33-1.342bln (exp. 1.31bln).


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  Motorola Solutions, Inc. (MSI) - Q4 adj. EPS USD 3.60 (exp. 3.43), Q4 revenue USD 2.7bln (exp. 2.53bln). Exec said it achieved all-time Q4 records in sales, operating earnings, EPS and cash flow, highlighting the strong demand it was continuing to see for its public safety and enterprise security solutions. Added it has a record backlog and a robust funding environment position. Q1 adj. EPS expected between USD 2.02-2.07 (exp. 1.97), and Q1 revenue growth expected to be +12-13% (exp. 2.02bln). FY adj. EPS seen between USD 11.10-11.22 (exp. 11.20), and FY23 revenue seen between USD 9.65-9.7bln (exp. 9.54bln).


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  SoftBank Group Corp. (SFTBY), Berkshire Grey (BGRY) - Softbank to acquire all outstanding shares of AI company Berkshire Grey for USD 1.30/shr (vs Thursday closing price of 1.71/shr).


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  Hewlett Packard Enterprise (HPE) - Beginning Q1, in order to align its segment financial reporting more closely with its current business structure, HPE implemented an organisational change, with the transfer of certain storage networking products, previously reported within the Storage reportable segment, to the Compute reportable segment.


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  Genpact Limited (G) - Q4 adj. EPS 0.70 (exp. 0.68), Q4 revenue USD 1.1bln (exp. 1.1bln). Sees FY23 adj. EPS between USD 2.92-2.99 (exp. 3.00), FY23 revenue seen between USD 4.64-4.71bln (exp. 4.36bln). Raises dividend +10%, adds USD 500mln to share buyback programme.

COMMUNICATIONS:

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  News Corporation (NWS) - Q2 adj. EPS 0.14c (exp. 0.28), Q2 revenue USD 2.521bln (exp. 2.61bln). Exec said a surge in interest rates and acute inflation had a tangible impact on all businesses, but these challenges were more ephemeral than eternal. Initiatives underway include an expected 5% headcount reduction (1,250 positions) this year. Dow Jones revenues +45% Y/Y, which it said highlights the value of its acquisitions of OPIS and CMA. Has been actively engaged in discussions with CoStar Group about a potential sale of Move; any transaction would be designed to create shareholder value and strengthen Realtor.com's competitive position.

CONSUMER CYCLICAL:

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  Tesla Inc (TSLA) - The automaker has raised the starting price of its Model Y crossovers in China by CNY 2k 0.8% to CNY 261.9k, after the company’s aggressive price cuts at the beginning of the year ignited demand, CNBC said.


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  Expedia Group Inc (EXPE) - Slipped over 10% in after hours trading following its Q4 numbers. Q4 adj. EPS 1.26 (exp. 1.65), Q4 revenue 2.62bln (exp. 2.71bln), Q4 gross bookings USD 20.5bln (exp. 21bln). CEO said that "while Q4 results were negatively impacted by severe weather, demand was otherwise strong and accelerating, and has been markedly stronger since the start of the year."


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  Ford Motor Company (F), Rivian Automotive, Inc. (RIVN) - Ford further reduced stake in Rivian Automotive to 1.15% (vs 9.7% stake in May 2022). NOTE: in its quarterly earnings report last week, Ford wrote-down the stake of its RIVN investment by USD 7.3bln.


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  Honda Motor Co., Ltd. (HMC) - Nine-month net profits rose +0.2% Y/Y to JPY 583.2bln, 9-month global automobile sales -8.7% Y/Y. Q3 operating profits were +22% at JPY 280.4bln, topping estimates (for JPY 229.4bln). Announced a share buyback for up to JPY 70bln. Sees FY22/23 global group retail sales of 3.85mln vehicles (prev. saw 4.1mln). Maintains annual operating profit forecast of JPY 870bln (exp. 871.28bln).


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  Adidas AG (ADDYY) - Lowered 2023 outlook, warned it faces loss if it cannot sell remaining stock of Yeezy trainers. FY23 revenue guidance cut by EUR 1.2bln, and operating profits by around EUR 500mln. Continues to review future options for the utilisation of its Yeezy inventory; guidance already accounts for the significant adverse impact from not selling existing stock. Expects currency-neutral sales to decline at a high-single-digit rate in 2023. Underlying operating profit is projected to be around the break-even level. Should it decide not to repurpose any of the existing Yeezy product going forward, would result in the write-off of the existing Yeezy inventory, would lower operating profit by an additional EUR 500mln. Expects one-off costs of up to EUR 200mln in 2023; costs are part of a strategic review aimed at reigniting profitable growth as of 2024. If all these effects above were to materialise, expects to report an operating loss of USD 700mln in 2023.


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  L'Oreal SA (LRLCY) - Sales growth was above expectations despite weakness in China. Q4 revenue EUR 10.32bln (exp. 10.13bln), comp. Sales +8.1% (exp. +6.8%). FY22 op. EUR 7.46bln (exp. 7.44bln), FY22 Net EUR 5.71bln (exp. 5.8bln). Proposes +25% dividend hike to 6.00/shr.


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  Mohawk Industries, Inc. (MHK) - Q4 EPS 1.32 (exp. 1.32), Q4 revenue USD 2.65bln (exp. 2.7bln). Exec said sales were slower than expected as residential flooring sales contracted with rising interest rates, declining home sales and lower consumer confidence. Customers lowered inventory levels, consumers reduced spending for renovation. MHK scaled back production rates, lowered inventories, which increased unabsorbed overhead expenses. Sees Q1 EPS at 1.29 (exp. 1.69).

CONSUMER STAPLES:

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  Flowers Foods, Inc. (FLO) - Q4 adj. EPS 0.23 (exp. 0.23), Q4 revenue USD 1.08bln (exp. 1.1bln). Sees FY23 adj. EPS between USD 1.20-1.30 (exp. 1.33), and sees FY23 revenue between USD 5.18-5.24bln (exp. 4.99bln).

FINANCIALS:

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  MSCI Inc. (MSCI) - MSCI February 2023 Index Review said 34 securities will be added, 24 securities will be deleted, from its MSCI ACWI Index. The three largest additions to the MSCI World Index will be Atlassian Corporation (TEAM), Axon Enterprise, Inc. (AXON), Reliance Steel & Aluminum Co. (RS). Changes effective at the close of business on February 28th.


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  PayPal Holdings Inc (PYPL) - Shares initially slipped 2% in after hours trade, but then reversed, surging by over 6%, as the payments company announced that its CEO was to retire by year-end. Q4 adj. EPS 1.24 (exp. 1.20), Q4 revenue USD 7.38bln (exp. 7.39bln). Q4 total payment volume USD 357.38bln (exp. 365.41bln), Q4 Venmo total payment volume USD 62.5bln (exp. 68.24bln), Q4 transaction revenue USD 6.70bln (exp. 6.80bln), Q4 active customer accounts 435mln (exp. 439.2mln). Sees Q1 adj. EPS between 1.08-1.10 (exp. 1.06), and sees FY23 adj. EPS at 4.87 (exp. 4.75), sees FY23 operating expenses down 'high single digits', plans additional USD 600mln in savings this year.


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  Standard Chartered PLC (SCBFY) - First Abu Dhabi Bank denied this week's reports that it was mulling a bid for Standard Chartered when the UK takeover rules lapse.


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  Barclays (BCS) - The bank is reportedly being probed by UK regulators over suspected persistent compliance failings, and anti-money laundering procedures.


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  Credit Suisse (CS) - Swiss regulator FINMA said the bank's outflows in Q4 were "indeed significant", and it monitors banks very closely in these situations.


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  ABN AMRO Bank N.V. (AAVMY) - The Dutch state intends to sell part of its holdings in ABN AMRO, taking its stake to just under 50% from 56%.


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  NatWest (NWG) - NatWest will stop offering loans to new customers looking to fund O&G exploration, extraction or production.


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  Euronext NV (ERNXY) - Sales rose Y/Y, has no plans to follow rivals with cloud computing deals.

ENERGY:

·        AkerBP (AKERBP NO) - Profits surge, lifts dividend. Q4 revenue USD 3.83bln (prev. 1.85bln Y/Y), Net USD 112mln (prev. 335mln). Q4 production 432mln BOEPD (prev. 412mln BOEPD).

HEALTH CARE:

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  Amgen (AMGN) - Files for common stock offering by the selling security holders; size not disclosed.


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  DexCom, Inc. (DXCM) - Q4 EPS 0.22 (exp. 0.27), Q4 revenue USD 815.2mln (exp. 809.7mln). Sees FY23 revenue between USD 3.35-3.49bln (exp. 3.47bln), sees FY23 GM between 62-63% (exp. 63.5%), and sees FY23 EBITDA about 26% (exp. 24%).


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  Doximity, Inc. (DOCS) - Q3 EPS 0.22 (exp. 0.18), Q3 revenue USD 115.3mln (exp. 111.5mln). Telehealth platform served 375k unique active clinicians in the quarter. Q4 revenue seen between USD 109.6-110.6mln (exp. 123.1mln), and sees FY23 revenue between USD 417.7-418.7mln (exp. 427.1mln); initial FY24 revenue seen greater than USD 500mln (exp. 519mln).


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  GlaxoSmithKline (GSK) - FDA Advisory Committee votes in support of GSK trials designed to evaluate Jemperli as a potential treatment for rectal cancer.


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  Roche (RHHBY) - Phase III data show Roche's Vabysmo rapidly improved vision and reduced retinal fluid in people with RVO; separately, Roche Foundation acquired 540k bearer shares.

REAL ESTATE:

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  Equity Residential (EQR) - Q4 normalised FFO/shr 0.94 (exp. 0.94). Sees FY23 normalised FFO/shr between USD 3.70-3.80 (exp. 3.77). Exec said numbers and guide reflect usual seasonal moderation patterns, though slightly more pronounced. Is seeing typical sequential improvement in rents and leasing activity, suggesting that the year is beginning in a way consistent with normal demand trends.

10 Feb 2023 - 09:31- EquitiesData- Source: Newsquawk