US EARLY MORNING: US equity futures are firmer, in fitting with APAC/European lead, ahead of Fed speak

SNAPSHOT: APAC markets were firmer and took impetus from the Wall St. rally on Monday, while the European open saw a continuation of the risk-on theme, highlighted by strength across the board. Following on, US equity futures are seeing similar broad-based gains of around 1.5%. In terms of stocks specifics, it has been light, but Foxconn (2317 TW/FXCOF) had a positive update as it noted Q3 revenue was better than expected, and looking ahead maintained FY22 guidance, as stated in August, while the Q4 outlook is cautiously positive. Elsewhere, the Dollar is lower and briefly dipped beneath 111.00, although it now resides well off session lows but still in the red to the benefit of G10 peers with GBP and EUR the outperformers. Overnight, RBA made a dovish 25bps hike (exp. 50bps) to 2.60%, with the Board committed to returning inflation to the 2–3% range over time and expects to increase interest rates further over the period ahead. Looking at fixed income, prices have seen minor retreat from overnight recovery peaks before a lengthy extension of recovery highs from late September cycle lows. Lastly, the crude complex is slightly firmer, although it is moving pretty sideways as market participants will be cognizant of the OPEC+ meeting on Wednesday. In terms of metals, both precious and base are benefitting from the aforementioned broader pullback in the Dollar.

DAY AHEAD: There is not much in the immediacy in terms of scheduled risk events, but the central bank speaker docket is very heavy on Tuesday, with highlights from Fed’s Logan, Williams, Daly (twice), and Jefferson, as well as ECB’s Lagarde, Centeno, and Enria. On top of this, UK Chancellor Kwarteng is also on the wires. On the Fed, whilst there has been a lot of rhetoric recently, in the last couple of days there has been some chatter, particularly from FBN's Gasparino, talking about a Fed Pivot due to risks of financial stability and although it is something the Fed is keeping an eye on, commentary has remained focused on inflation and officials have suggested the risk of inflation being too high is greater than the Fed doing too much. Lastly, US data comes via factory orders, JOLTS, and durable goods revisions.

WEEK AHEAD: The US jobs report on Friday is the stand out event, but before then there is the RBNZ rate decision, which follows on from the dovish RBA hike, with the bank expected to hike 50bps to 3.5% (Newsquawk preview here). Moreover, ECB minutes and European summit on Thursday, and OPEC policy meeting on Wednesday, where an output cut of somewhere between 0.5-1.5mln is expected, with sources pointing more towards the top end of the range (Newsquawk preview here). Our Full week ahead briefing can be accessed here.

CENTRAL BANKS:

RBA: Surprised markets with a smaller-than-expected rate hike of 25bps, instead of the market expectations of a 50bps. Follows the central bank's hints throughout the past month of a future slowdown in pace of rate hikes. Nonetheless, the central bank has suggested further upcoming hikes with the Board committed to returning inflation to the 2–3% range over time and it expects to increase interest rates further over the period ahead. RBA reiterated that the size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market, while the Board remains resolute in its determination to return inflation to the target.

ENERGY:

• 
  GAS: German Finance Minister Lindner stated they are open to joint steps on the international gas market, prepared to discuss measures to contain gas prices. EU power market needs to be reformed and joint purchases need to be considered.


• 
  US: US Treasury Official Harris said Russian oil price cap will be high enough to maintain Russian incentive to continue producing; not yet been a decision on the price. Three Russian price cap sanctions planned; December 5th sanctions will target Russian crude, then diesel and lastly lower value products such as Naphtha.

GEOPOLITICS:

• 
  NORTH KOREA: North Korea missile appears to have flown over Japan and past Japanese territory which landed in the Pacific Ocean, according to NHK. Japan's government warned residents of Hokkaido and Tokyo to take shelter after North Korea's latest missile launch

COMMUNICATION:

• 
  Twitter (TWTR) - Another Twitter whistleblower is considering taking the stand when Elon Musk faces the company in court over his USD 44bln buyout deal later in two weeks, and he may have a few things to say about bots, according to NY Post.

AUTOMOBILES:

• 
  Rivian (RIVN) - Delivered 6,584 vehicles in Q3, while it added that figures remain in line with co. expectations, and it believes it is on track to deliver on 25k annual production guidance.


• 
  BMW (BMWYY) - Q3 BMW brand sales in US up 3.2% Y/Y to 75,619.

INDUSTRIALS:

• 
  Boeing (BA) - Reportedly does not expect approval for 737 Max 10 before summer 2023, according to a letter from the FAA to Congress.


• 
  Lockheed Martin (LMT) - Awarded USD 5.1bln Navy contract modifications.


• 
  General Dynamics (GD) - Awarded USD 532.92mln Navy contract modification

HEALTH CARE:

• 
  Roche (RHHBY) - Granted FDA approval for the first companion diagnostic to identify patients with low HER2 metastatic breast cancer, eligible for ENHERTU.


• 
  Kezar Life Sciences (KZR) - Has received clearance of its Investigational New Drug application from the US FDA for zetomipzomib, its first-in-class, selective immunoproteasome inhibitor, for the treatment of autoimmune hepatitis.


• 
  Rocket Pharmaceuticals (RCKT) - Announces USD 100mln common stock offering.

FINANCIALS:

• 
  UBS (UBS) - UBS (UBS) credit default swaps reach decade high amid Credit Suisse (CS) woes, according to Reuters.


• 
  Credit Suisse (CS) - Sent a new memo to high level employees which stated "speculating that we have a liquidity issue simply would be completely false".


• 
  Bank OZK (OZK) – Raises quarterly dividend roughly 3% to USD 0.33/shr.

ENERGY:

• 
  Western Midstream (WES) – Western Midstream and Occidental (OXY) sign a letter of intent with the objective of pursuing opportunities to produce and deliver low-carbon intensity oil and gas products to market through the development of carbon dioxide capture.

REAL ESTATE

• 
  Essex Property Trust (ESS) - CEO Michael Schall to retire, effective March 31st, 2023.

MATERIALS:

• 
  Mosaic (MOS) – Announced that North American Phosphates was negatively impacted by damage caused by Hurricane Ian.

TECHNOLOGY:

• 
  AXT (AXTI) - Cut its Q3 revenue outlook to USD 34-35mln (prev. USD 39-41mln).


• 
  Blackbaud (BLKB) - Clearlake discloses 18.4% stake in Blackbaud, may seek strategic alternatives.


• 
  Apple (AAPL) - iPhone exports from India doubling, according to Bloomberg, in a boon to the plan of Indian PM Modi; additionally, exports of India-made iPhones surpass USD 1bln in a five-month period, according to ET Now citing sources.


• 
  Foxconn (FXCOF) - September sales +40.4% Y/Y with Q3 revenue better than expected. Maintain FY22 guidance, as stated in August; Q4 outlook is cautiously positive. Need to closely monitor inflation, demand, COVID and supply chains in the period. Regarding September, strong revenue performance in smart consumer electronics products was the main driver of overall revenue; smart consumer electronics, cloud and networking products delivered strong double-digit growth.

CONSUMER DISCRETIONARY:

• 
  Poshmark (POSH) – To be acquired by Naver at USD 17.90/shr or USD 1.2bln enterprise value. Note, POSH closed Monday at USD 15.57/shr.

04 Oct 2022 - 09:34- Fixed IncomeResearch Sheet- Source: Newsquawk