US EARLY MORNING: US equity futures are around flat; traders continue to focus on potential rate cuts by major central banks in 2024

US PRE-MARKETS: US equity futures are flat, Treasury yields are lower (front-end leads the outperformance as the curve bull-steepens slightly), the Dollar Index is lingering around neutral, while oil benchmarks are slightly higher despite API data reportedly showing a surprise build in headline crude stocks. The theme this morning has once again been focussed on bets that major central banks will cut rates next year; this morning, UK inflation declined by more than expected, seeing the EGB and stocks complex rally in Europe. The Day ahead is thin in terms of scheduled events for US traders, however, consumer confidence data is eyed amid the key holiday spending season, while equity traders will be on the lookout for earnings from Micron (MU) afterhours. Energy traders will be looking to the DoE's weekly inventory data, while keeping an ear out on geopolitical events in the Middle East (there is some chatter that intensive talks are underway on a potential second Gaza truce). There is 20yr bond supply from the Treasury.

TODAY’S AGENDA:

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


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  EUROPE DAY AHEAD: The European data slate is thin, with only Eurozone current account and construction output data due in the morning; flash consumer confidence for December will be out in the afternoon, and is expected to show a slight improvement. ECB chief economist Lane will at the Economic and Social Research Institute on the Euro area outlook


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  US DAY AHEAD: The US day is similarly sparse, with weekly MBA mortgage applications data, the Conference Board’s gauge of consumer confidence in December (2 point improvement to 104.0 expected at the headline level). CAD watchers will note the release of the BoC meeting minutes (preview in our weekly note, here). Fed’s 2025 vote Goolsbee will give another set of remarks – he has already spoken a few times this week, and is unlikely to add anything new to the narrative. In the afternoon, the Treasury will auction USD 13bln of 20yr bonds. Afterhours, equity traders will be watching out for numbers from Micron (MU); expectations can be found here. The DoE will release weekly energy inventory stats; for comparison, the weekly API data reportedly showed headline crude stocks building +0.9mln (exp. -2.3mln), Cushing +1.9mln; Gasoline stocks +0.7mln (exp. +1.2mln), distillate stocks +2.7mln (exp. +0.5mln).


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  REVIEW - UK INFLATION: CPI eased to 3.9% Y/Y in November from 4.6% in October (analysts had expected a fall to 4.3% Y/Y); core CPI fell to 5.1% Y/Y (exp. 5.6%, prev. 5.7%); Services CPI fell to 6.3% Y/Y (from 6.6%; the BoE had expected 6.9% at this point). The data represents the second straight month where CPI has undershot consensus expectations, helping to fuel BoE rate cut bets. "The most striking thing about these data was the sharp easing in domestic inflationary pressures," Capital Economics said, "some of the decline in core inflation was due to the global influence of core goods inflation, but some of it was due to services inflation falling." Ahead, CapEco thinks that the recent downward trends in CPI and core inflation will stall over the next few months before starting to decline more decisively again in February. Its economists add that the recent string of softer-than-expected wage and inflation data mean the BoE might not wait until late 2024 to cut rates. Market implied pricing have discounted 133bps worth of cuts through 2024 vs 116bps before the announcement, and the first rate cut is now seen in May (pre-release it was June). 

EQUITY NEWS:

INDUSTRIALS:

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  FedEx Corp (FDX) - Shares dived by 9% afterhours after it reported a profit miss and cut FY revenue guidance. Q2 2024 adj. EPS 3.99 (exp. 4.20), Q2 revenue USD 22.2bln (exp. 22.41bln); expects to buyback added 1bln of stock during FY24. Sees 2024 low-single-digit percentage decline in revenue Y/Y (prev. saw flat, exp. -9%). Still forecasts FY24 adj. EPS 17.00-18.50 (exp. 18.22). FY24 CapEx view 5.7bln (exp. 5.6bln). Exec foresees another "strong" holiday season, expects peak 2023 holiday season volumes to be similar to 2022 levels, and sees 'modest' margin contraction for FedEx Express in 2024.


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  Southwest Airlines (LUV) - Southwest Airlines and its pilots' union have finalised a new preliminary labour agreement, marking the end of prolonged negotiations, CNBC reports. The deal, worth approximately USD 12bln over five years, includes substantial pay raises for pilots. Approval from the pilots is still pending.


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  Steelcase (SCS) - Q3 EPS 0.30 (exp. 0.22), Q3 revenue USD 777.9mln (exp. 796mln), Q3 orders +15% in Q3 Y/Y, backlog of orders approximately USD 699mln (-10% Y/Y), but orders through the first three weeks of Q4 +7% Y/Y. Sees Q4 EPS between 0.19-0.23 (exp. 0.20), and sees Q4 revenue between USD 765-790mln (exp. 789.1mln).


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  RTX (RTX) - CTO Mark Russell is to retire on January 1st, will continue in an advisory role. Juan de Bedout named CTO and senior vice president.


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  Avis Budget (CAR) - CEO Joseph Ferraro sold 18.5K shares on December 15th for a total USD 3.6mln.


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  Virgin Galactic (SPCE) - Virgin Galactic schedules its 11th spaceflight, 'Galactic 06,' for January 26th.

ENERGY:

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  Energy Inventories - Weekly API energy inventory data reportedly showed headline crude stocks building +0.9mln (exp. -2.3mln), Cushing +1.9mln; Gasoline stocks +0.7mln (exp. +1.2mln), distillate stocks +2.7mln (exp. +0.5mln).


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  Shell (SHEL), Equinor (EQNR) - Shell subsidiary greenlights the Sparta deep-water project in the US Gulf of Mexico, co-owned with Equinor. Projected peak production at 90k BOE/day, with estimated recoverable resources of 244mln BOE, and slated to start production in 2028.


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  Marathon (MPC) - Wilmington refinery in California (363k BPD capacity) reports unplanned flaring.

MATERIALS:

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  Mosaic (MOS) - Mosaic expects Q4 potash volumes at the low end of previous guidance, cites dry weather conditions posing risks to Brazil fertiliser shipments in Q4.

TECH:

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  Alphabet (GOOG) - Google plans to reorganize a big part of its 30,000-person ad sales unit, an executive told some staff last week, prompting anxiety that some departments will face job cuts, The Information reports. This move aligns with Google's increased use of machine-learning for ad sales, expecting high revenue with low operational costs.


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  Nvidia (NVDA) - Director Mark Stevens sold 10.2K shares on December 15th for a total USD 5.0mln.


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  AMD (AMD) - AMD received notice of a "mini-tender" offer from TRC Capital aiming to buy up to 1mln shares (about 0.06% of total) at USD 123.45/share, lower than market value. AMD advises stockholders against participating in this offer and disassociates itself from TRC Capital's bid.


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  UiPath (PATH) - CFO Ashim Gupta sold 52k shares on December 15th for a total USD 1.33mln.

COMMUNICATIONS:

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  Comcast (CMCSA) - Comcast's Universal Studios is reportedly planning its inaugural UK theme park, having acquired a sizable site near London.


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  Meta Platforms (META) - CEO Mark Zuckerberg sold 28,009 shares at USD 335.91/shr on December 15th for a total USD 9.41mln.

CONSUMER:

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  Amazon (AMZN) - Games Workshop finalised an agreement with Amazon for the development of Warhammer 40,000 into films and TV series, granting Amazon exclusive rights.


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  Automakers - General Motors (GM), Toyota (TM), Stellantis (STLA), Ford (F), Mercedes-Benz (MBG), Volkswagen (VWAGY) are among automakers who oppose the US auto safety regulator's plan to recall 52mln air bag inflators due to rupture risks, Reuters reports. NHTSA argued for recalls citing a fatality and injuries after an eight-year investigation; automakers say the risks are minimal and question the basis for the recall.


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  Xpeng (XPEV), Alibaba (BABA) - Alibaba reports 9.2% Class A share stake in Xpeng as of Dec 15th (prev. 12.5% as of Dec 6th), according to an SEC filing.


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  Volkswagen (VWAGY) - To use North American standards for future electric cars and study adapter solutions for existing vehicles.


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  Rivian (RIVN) - Is taking another big step toward opening its second manufacturing facility as it has chosen Clayco as its partner to build the massive USD 5bln EV plant, according to Electrek.


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  LMVH (LVMUY) - Antoine Arnault, Co’s environment head, said the company could begin to drop suppliers which do not comply with their own environmental standards, FT reports.


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  AB InBev (BUD) - Anadolu Efes is to acquire AB InBev’s stake in their Russian JV, there will be no upfront cash payment but future payments will occur dependent on the units performance, FT reports.

FINANCIALS:

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  Prudential (PRU) - Prudential Financial subsidiary secured a USD 9.2bln longevity risk transfer deal with NN Life, reinsuring 200,000+ policies from Prudential Insurance. This marks Prudential's inaugural international longevity reinsurance in the Dutch market.


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  ING Groep NV (ING) - ING is to triple its financing for renewable energy to EUR 7.5bln by 2025, and will cease financing oil and gas exploration and production by 2040, CEO said.

HEALTHCARE:

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  Rite Aid (RAD) - Rite Aid is prohibited from using AI facial recognition following the FTC's finding of deploying the technology without adequate safeguards. The FTC found misidentification of consumers, especially women and people of colour as shoplifters, leading to a five-year ban.


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  Vertex (VRTX) - President and CEO David DeStefano sold 39,300 shares on December 15th at USD 27.1552/shr.


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  Fresenius SE (FSNUY) - Receives US FDA warning letter related to inspection at medical device operations located in Massachusetts.

20 Dec 2023 - 09:30- Fixed IncomeData- Source: Newsquawk