US EARLY MORNING: US equity futures are around flat ahead of manufacturing ISM and remarks from Fed Chair Powell

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  EQUITIES: APAC equities started the new month mixed, European equities are firmer. US equities are currently trading around flat, ahead of ISM manufacturing PMI data and remarks from Fed Chair Powell, ahead of the blackout window before the Fed’s December 13th confab (Powell primer below).


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  FX/BONDS: The Dollar Index is trading around flat. Bond yields are lower across the curve, with outperformance in the short-end, as the curve modestly bulls-steepens, though yields have come off lows. Chair Powell is today’s highlight; markets currently price rates will remain unchanged at 5.25-5.50% in December, while there is pricing for four full 25bps rate cuts in 2024, and a decent chance of a fifth; Powell may lean back against those bets.


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  CRUDE: Crude futures are trading with small losses. On Thursday, OPEC+ announced 1mln BPD of voluntary supply cuts in Q1 2024 (Russia will cut by 0.5mln, the rest will be made by other OPEC+ members), on top of the approximately 5mln BPD already implemented; these are in addition to the 1mln of voluntary cuts the Saudi's have been making since July (which have been extended). The exact details have not been released by OPEC+ leading to some concerns about the group's commitment to tighter supply. Morgan Stanley said the commitment to OPEC+ cuts appeared to be uncertain, and it expects only partial compliance, predicting that the market will revert to a small surplus again in Q2 and Q3 of 2024.

TODAY’S AGENDA:

DAY AHEAD: Final manufacturing PMI data out of Europe, and remarks from ECB President Lagarde, and ECB’s Elderson are the highlights. The US day will focus its attention on remarks due from Fed Chair Powell, who is due to speak on two occasions today (one at a Spelman College event, the other is a roundtable discussion with Fed’s Cook (voter) – see below. Elsewhere, the ISM manufacturing report for November is due, where the consensus looks for the headline to rise slightly though remain sub-50; the expected is for the headline to tick-up to 47.7 in November (prev. 46.7); Oxford Economics said that “early indications are that the ISM manufacturing survey bounced back in November but remains below its 2023 high from September (49.0) and squarely in contraction territory.” Canadian jobs data is expected to see the unemployment rate tick up slightly to 5.8%. Weekly Baker Hughes rig count data will be out in the afternoon. On the CRA docket, DBRS will review Germany (currently AAA) and Spain (currently A); S&P will review France (currently AA) and Poland (currently A-); Fitch Ratings may review UK (currently AA-) and Greece's (currently BB+).

POWELL PRIMER: Powell’s remarks come ahead of the blackout window that commences at the end of this week ahead of the December 13th FOMC meeting, where the consensus looks for an unchanged rate decision. Currently, the market is pricing 4-5 rate cuts in 2024, Powell may choose to lean back against that market pricing to prevent any loosening of financial conditions. Powell may push a higher-for-longer message as the Fed still tries to make progress on bringing inflation back to target, and will likely add that the Fed is not thinking about rate cuts at the moment since it is too early to declare victory on prices, and like other officials, he may choose to retain the option of further rate hikes if the situation demands. We’re also due to get another batch of comments from the Fed’s Goolsbee (2023 voter) and Fed’s Barr (voter).

EQUITY NEWS:

TECH:

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  Microsoft (MSFT), Alphabet (GOOG) - Google urges Britain's antitrust regulator to act against Microsoft, alleging unfair business practices disadvantaging rivals in cloud computing, Reuters reports. CMA probes industry dominance of Microsoft and Amazon, with Google highlighting licensing practices favouring Azure.


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  Dell Technologies (DELL) - Q3 adj. EPS 1.88 (exp. 1.47), Q3 revenue USD 22.25bln (exp. 23.bln); said revenue miss was due to a slower-than-expected recovery in the hardware and software market. Q3 adj. operating income USD 1.96bln (exp. 1.78bln). By segment, Q3 Infrastructure Solutions sales USD 8.50bln (exp. 8.52bln); Q3 Servers and Networking sales USD 4.66bln (exp. 4.44bln); Q3 Storage sales USD 3.84bln (exp. 4.06bln); Q3 Client Solutions Group sales USD 12.28bln (exp. 12.97bln); Q3 Commercial sales USD 9.84bln (exp. 10.39bln); Q3 Consumer sales USD 2.44bln (exp. 2.6bln). Exec said it expects to return to growth in FY25; said servers and networking business +9% sequentially, fueled by customer interest in generative AI; heading into FY25, expects revenue growth given these tailwinds. Sees Q4 adj. EPS between 1.60-1.80 (exp. 1.82), and sees Q4 revenue between USD 21.5-22.5bln (Exp. 24bln). Sees FY24 adj. EPS between 6.53-6.73 (exp. 6.35).


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  AI Stocks - The Biden administration compels a Saudi Aramco venture capital firm to divest its shares in Rain AI, a Silicon Valley startup, due to national security concerns following a review by the Committee on Foreign Investment in the United States.


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  Marvell Technology (MRVL) - Q3 EPS 0.41 (exp. 0.40), Q3 revenue USD 1.42bln (exp. 1.40bln). Q3 revenue from datacentre end market grew 20%+ sequentially, sees growth of 30%+ in Q4. Ahead, exec said strong growth from AI and cloud will carry it through softening demand environment in other end markets; these dynamics are reflected in its guidance. Sees Q4 EPS between 0.41-0.51 (exp. 0.49), and sees Q4 revenue between USD 1.42bln (exp. 1.46bln).


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  Lattice Semiconductor (LSCC) - Board authorised share repurchases of an additional USD 250mln.


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  Elastic (ESTC) - Q2 EPS 0.37 (exp. 0.24), Q2 revenue USD 311mln (exp. 304.1mln). Sees Q3 EPS between 0.30-0.32 (exp. 0.27), and sees Q3 revenue between USD 319-321mln (exp. 318.4mln). Raises FY24 EPS outlook to between 1.06-1.15 (exp. 1.08) from 1.01-1.11; raises FY24 revenue outlook to between USD 1.247-1.253ln (exp. 1.25bln) from USD 1.242-1.25bln.


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  Lyft (LYFT) - CEO told CNBC that it has 45% more driver hours now Y/Y, claimed that employee confidence was at the highest in four years.


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  Broadcom (AVGO) - Following Broadcom's USD 61bln acquisition of VMware, the chipmaker intends to terminate around 1,267 California-based VMware employees starting January, Bloomberg reports. The cuts will not close VMware's Palo Alto headquarters, but will affect multiple positions as it delves further into the software sector.


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  Ambarella (AMBA) - Q3 EPS -0.28 (exp. -0.39), Q3 revenue USD 50.6mln (exp. 50mln). Exec said customers appeared to be making progress with inventory reduction, expects to return to revenue growth in FY 2025. Sees Q4 sales of USD 51.5mln (exp. 50.3mln).


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  PagerDuty (PD) - Q3 EPS 0.20 (exp. 0.14), Q3 revenue USD 108.7mln (exp. 107.3mln). Q3 ARR +13% at USD 438.9mln. Sees Q4 EPS between 0.14-0.15 (exp. 0.13), and sees Q4 revenue USD 109.5-111.5mln (exp. 110.3mln). FY24 EPS seen between 0.72-0.73 (exp. 0.64), and FY24 revenue seen between USD 429-431mln (exp. 428.4mln).


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  Samsara (IOT) - Q3 adj. EPS 0.04 (exp. 0.01), Q3 revenue USD 237.5mln (exp. 224.7mln). Exec said that in the quarter it achieved the milestone of surpassing USD 1bln ARR. Sees Q4 adj. EPS 0.02-0.03 (exp. 0.02), Q4 revenue USD 257-259mln (exp. 250.4mln). Lifts FY24 EPS outlook to between 0.05-0.06 (exp. 0.02) from 0.00-0.02; lifts FY24 revenue outlook to USD 918-920mln (exp. 899mln) from USD 896-900mln.


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  UiPath (PATH) - Q3 EPS 0.12 (exp. 0.07), Q3 revenue USD 326mln (exp. 315.6mln). Q3 ARR +24% Y/Y at USD 1.378bln (exp. 1.361bln), Q3 dollar-based net retention rate 121%. Sees Q4 ARR between USD 1.450-1.455bln, and sees Q4 revenue USD 381-386mln (exp. 383mln).

COMMUNICATIONS:

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  Disney (DIS) - Reinstates quarterly dividend of USD 0.30/shr for H2 FY23 (representing an annual dividend yield of around 0.6%). Separately, shareholder Blackwells Capital voiced support for Disney in its engagement with activist investor Nelson Peltz' Trian Fund Management.


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  ByteDance (not listed) - A US judge blocked Montana's ban on TikTok, citing infringement on users' free speech, BBC reports. Montana's law aimed to prohibit the app and penalise firms offering it. TikTok sued the state, and the judge ruled the ban unconstitutional, allowing users to continue using the app. Montana's attorney's office is considering further action.


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  Twitter (not listed) - Advertisers show reluctance to resume spending on X following Elon Musk's derogatory remarks, with several marketing agencies indicating brands standing firm or advised to halt advertising on the platform, likely leading to prolonged freezes, NYT reports.

HEALTHCARE:

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  Becton Dickinson (BDX) - Becton Dickinson responds to FDA Safety Communication on plastic syringe evaluation, confirming its syringes aren't affected. Says it is committed to supporting the US healthcare system and willing to boost production for impacted providers.


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  Seagen (SGEN), Astellas (ALPMF), Merck (MRK) - Astellas Pharma and Seagen's sBLA for Padcev and Keytruda combination therapy in urothelial cancer enters FDA priority review with a decision expected by May, 2024. Positive Phase 3 trial results highlight improved survival and safety for previously untreated patients.


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  AstraZeneca (AZN) - Discontinuation of STABILIZE-CKD and DIALIZE-Outcomes Phase III trials due to substantially increased enrolment timelines and low event rates, respectively, which made it prohibitive to deliver study results within a timeframe to meaningfully advance clinical practice.

CONSUMER:

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  Tesla (TSLA) - Tesla begins Cybertruck deliveries. Announced prices start at USD 60,990 for the vehicle, higher than the initial USD 40,000 announcement price in 2019. CEO Elon Musk anticipates an "extremely difficult" 18-month ramp-up post initial deliveries.


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  Ulta Beauty (ULTA) - Topped expectations in Q3, and narrowed its guidance, adding 12% in afterhours trading. Q3 2023 EPS 5.07 (exp. 4.96), Q3 revenue USD 2.50bln (exp. 2.47bln); Q3 comp sales +4.5% Y/Y (exp. 3.3%) as transactions rose +5.9%, though average ticket prices fell 1.4%); Q3 gross margin 39.9% (exp. 39.8%), Q3 operating margin 13.15% (exp. 13.0%). Q3 merchandise inventories +9.8% Y/Y. Longtime CFO Scott Settersten will retire in April 2024, will be succeeded by Senior Vice President of Finance Paula Oyibo. Narrows FY23 EPS outlook to between 25.20-25.60 (exp. 25.37, prev. saw between 25.10-25.60), and narrows its FY23 SSS outlook to +5-5.5% (prev. guided +4.5-5.5%), narrows FY23 sales outlook to between USD 11.1-11.15bln (exp. 11.1bln, prev. guided 11.05-11.15bln).

INDUSTRIALS:

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  United Airlines (UAL) - United Airlines Holdings predicts a weaker Q4 profit, anticipating between USD 1.50-1.80 (exp. 2.06). Said rising fuel prices (up over 20% since July) are squeezing profits. It expects an 11% increase in average fuel costs in Q4 Q/Q, leading to a more challenging financial outlook. Said it would increase capacity by nearly 10% this winter, will be flying to more than double the number of cities from Houston.

01 Dec 2023 - 09:30- Research Sheet- Source: Newsquawk