US EARLY MORNING: US equity futures are flat; calm on the banking front after the FDIC announced First Citizens will assume deposits and loans of Silicon Valley Bridge Bank

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  OVERNIGHT: Asian stocks were mixed as markets took a breather from recent bank jitters, while Chinese stocks underperformed as attention turned to earnings (see here). European equities opened with a constructive bias on Monday, with banking names gaining after a weekend of calm, however, gains were faded shortly after the open without any obvious catalyst. There are some geopolitical concerns, however, after Russian President Putin said Moscow will station tactical nuclear weapons in Belarus; the EU has threatened Belarus with sanctions if it goes ahead with the deal, but neither NATO nor the US has raised its nuclear posture.


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  US PRE-MARKETS: US equity futures were rising at the start of the week, with the weekend free of headlines relating to further bank collapses, though gains have pared back as equity indices in Europe turned flat; there has been no specific headline catalyst for the more restrained tone of trade. Banking developments over the weekend were positive; the FDIC early Monday announced that First Citizens (FCNCA) will assume all deposits and loans of Silicon Valley Bridge Bank (see here for more), helping to support the mood. Market participants still want to see progress on the First Republic (FRC) rescue, as well as progress in adding further protections to deposits in the banking system; on the latter, the lack of contagion appears to be mitigating the need for any immediate policy changes, while on the former, reports over the weekend said regulators were mulling expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, and they still see the regional bank as stable enough to operate without any immediate intervention. Meanwhile, Treasury yields are rising with the haven-bid continuing to deflate as the banking issues seem to be contained within a few pockets of the market; this is supported by the Fed’s weekly data on deposits and cash at major banks (see here). Pricing of the Federal Reserve’s rates trajectory is also moving back in a hawkish direction, with the market-implied probability of a +25bps rate hike at the May confab almost back to 50-50 again at one point today (the tilt towards unchanged pricing resumed as risk conditions become more cautious). The day ahead is thin, although this week there is a heavy amount of Fedspeak – including dual testimonies from the Fed’s Vice Chair of Supervision Barr – as well as inflation data from the US and the Eurozone; see the Day Ahead section below for more.

DAY AHEAD:

• Our real time events calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Analysts are expected a mixed showing in the German Ifo data, with the current climate and expectations seen moderating a little, while the conditions component is expected to register small improvement. Eurozone money supply and loans data could get some attention, although it is for the month of February, before the recent woes in global banking. Elsewhere, UK CBI distributive trades data is due. On the speakers’ slate, ECB’s Elderson and Schnabel are due to make appearances, while from the UK, BoE chief Bailey will speak (you can recap on the BoE’s recent meeting in our weekly central bank briefing here).


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  NORTH AMERICAN DATA/SPEAKERS: There is not too much of consequence on the US data slate, with only the Dallas Fed Manufacturing data for March due. On the speakers’ slate, Fed’s Jefferson (voter) will speak on policy; officials speaking in wake of the Fed meeting thus far (Bullard, Bostic, Barkin) have generally been keeping their focus on fighting inflation, rather than expressing any major concerns about financial stability.


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  SUPPLY: Germany will sell EUR 6bln of 6- and 12-Month T-Bills; France will sell between USD EUR 5-6.6bln of 3-, 6- and 12-month T-Bills. The BoE will conduct its long-term Gilt Sale; note on Friday, the BoE said that in Q2, it will sell GBP 3.08bln of Gilts in short, medium and long maturity sectors (vs GBP 3.25bln in Q1), adding that each Gilt auction in Q2 will be for GBP 770mln (vs 650mln in Q1), and it will hold four auctions for each Gilt maturity sector. Meanwhile, the US will auction USD 42bln of 2yr Notes, as well as 13- and 26-week Bills.


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  WEEK AHEAD: Highlights include US PCE, China PMIs, EZ CPI, Aus CPI. There is also quite a bit of Fedspeak, including Fed’s Jefferson today; other notable Fedspeak this week includes Barkin (non-voter) and Collins (non-voter) on Thursday; VC of Supervision Barr (voter), who will testify before the House Financial Services Committee on Friday; the influential FOMC Vice President Williams (permanent voter) will also speak on policy on Friday, while the hawkish Fed Governor Waller (voter) will talk about the Phillips Curve on Friday. Our week ahead briefing can be accessed here, while our central banks weekly briefing can be accessed here.

EQUITY NEWS:

FINANCIALS:

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  US Banks - The Treasury and FSOC Friday said that the US banking system remains sound and resilient. The FSOC heard a presentation from staff of the NY Fed on market developments and discussed current conditions in the banking sector, and discussed ongoing efforts to monitor financial developments, noting that some institutions have come under stress.


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  SVB Financial Group (SIVB), First Citizens BancShares, Inc. (FCNCA) - The Federal Deposit Insurance Corporation (FDIC) confirmed that First Citizens (FCNCA) will assume all deposits and loans of Silicon Valley Bridge Bank (SIVB) from the FDIC. The transaction includes the purchase of about USD 72bln of SVB and National Association’s assets. Around USD 90bln in securities and other assets will remain in the receivership for disposition by the FDIC. As of March 10th, Silicon Valley Bridge Bank had approximately USD 167bln in total assets and about USD 119bln in total deposits. The transaction included the purchase of about USD 72bln of Silicon Valley Bridge Bank at a discount of USD 16.5bln. Approximately USD 90bln in securities and other assets will remain in the receivership for disposition by the FDIC. In addition, the FDIC received equity appreciation rights in First Citizens BancShares common stock with a potential value of up to USD 500mln.


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  First Republic Bank (FRC) - US regulators mull expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, Bloomberg reported. Officials have yet to decide on what support they could provide First Republic, if any, and an expansion of the Federal Reserve’s offering is one of several options being weighed, the report said. Regulators still see First Republic as stable enough to operate without any immediate intervention as the company and its advisers try to work out a deal to shore up its balance sheet.


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  US Bank Deposits - The Fed’s weekly data of assets and liabilities of commercial banks (week ending March 15th, which covers the week SVB collapsed) showed deposits at US small commercial banks declined by USD 120bln in the week, while borrowings rose USD 252.4bln, and cash assets rose USD 96.7bln. For large commercial banks, deposits rose USD 66bln, borrowings rose USD 251bln, and cash assets increased by 305.1bln. Total commercial bank deposits, therefore, declined USD 53.2bln in the week, while borrowings rose USD 503.4bln, and cash assets rose 401.7bln. (See here for further anlaysis).


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  Charles Schwab Corporation (SCHW) - Cautious mention in Barron’s; while Wall Street analysts suggest that investors spooked by liquidity concerns everywhere have overreacted in selling SCHW, Barron’s says there are clear reasons to be cautious toward the stock, where rising interest rates and outflows of clients’ cash could take a sizable bite out of its earnings.


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  Credit Suisse (CS) - Member of the Swiss Federal Council Karin Keller-Sutter said the bank tapped the SNB for a “large multi-billion amount” last weekend to secure liquidity, SRF Radio said. Separately, Credit Suisse is reportedly facing the threat of a potential probe and disciplinary action over how top managers ran the bank in the lead-up to its collapse, Bloomberg said.


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  HSBC Holdings PLC (HSBC) - The bank will take a vote on the proposal to revamp its business, which could include separating its Asia unit, and a separate vote on whether its dividend should be hiked to pre-COVID levels, City AM reports. The Board recommends that shareholders vote against the proposals.

TECH:

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  Salesforce.com, inc. (CRM) - Elliott Investment Management will not proceed with director nominations at Salesforce; the decision was in light of CRM's previously announced 'New Day' multi-year profitable growth framework, strong fiscal year 2023 results, fiscal year 2024 transformation initiatives. Salesforce and Elliott have committed to continue the productive working relationship they have developed together. Elsewhere, the software company can see another round of job cuts while it continues to focus on improving profitability, COO told Bloomberg. COO added that the process of strategically reviewing the business, and consultant Bain & Co. was yet to provide its final recommendations.


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  Microsoft Corp. (MSFT) - Microsoft has threatened to cut off access to its internet-search data, which it licenses to rivals, if they do not stop using it as the basis for their own AI chat products, Bloomberg reports. Microsoft told at least two customers that using its Bing search index to feed their AI chat tools violates the terms of their contract, adding that it may terminate the licenses providing access to its search index.

COMMUNICATIONS:

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  ByteDance (unlisted) - US House Speaker McCarthy said lawmakers will move forward with legislation to address national security worries about TikTok, alleging China’s government had access to the short video app’s user data, Reuters reports. However, the WSJ reports that banning TikTok in the US will be easier said than done, as legal and practical obstacles could confound any bid to erase the Chinese-owned app’s huge US footprint.


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  Twitter Inc. (unlisted) - CEO Elon Musk said Twitter employees will receive stock awards based on a roughly USD 20bln valuation, less than half of the USD 44bln price he acquired the company for last year, WSJ reports.


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  Cineworld Group PLC (CNWGY) - Elliott Management is plotting a takeover of large chunks of Cineworld, Sky reports. Elliott explored a bid for the whole of the group, but its latest proposal to Cineworld’s advisers does not include the company’s operations in the UK and US, Sky said.

CONSUMER:

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  Ford Motor Company (F) - Constructive mention in Barron’s, which said that Ford was losing billions on EVs, but it was not a problem for the stock because Ford is making most of its EVs at two factories, while Tesla was operating out of one, meaning that Ford needs to sell more cars to reach scale.


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  Adidas AG (ADDYY) - Beyonce and Adidas have mutually agreed to part ways, Hollywood Reporter said. In 2018, Beyonce entered a creative partnership with Adidas, where she relaunched her Ivy Park activewear line and also developed new footwear and apparel for the brand, HR wrote, but there has apparently been major creative differences between Ivy Park and Adidas.


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  Dollar General Corporation (DG) - Cautious mention in Barron’s, which said that Dollar General, which is a staple for many, has a record of overcharging, and the newspaper finds that four states fined the retailer a total of more than USD 1mln for price inaccuracies in 2021 and 2022.


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  Alibaba Group (BABA) - Founder Jack Ma returned to mainland China to visit school in Hangzhou that was funded by Alibaba founders in 2017, SCMP reports. While Ma has gradually faded out of public sight, his whereabouts are closely watched, the Alibaba-owned newspaper said, especially after the companies he founded came under regulatory scrutiny amid Beijing’s intensified crackdown on the tech sector.


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  Volkswagen (VWAGY) -  VW and Norway’s Freyr Battery have both brought forward plans to build battery factories in North America and delayed plants in Europe because of generous subsidies in the US Inflation Reduction Act that can add up to as much as USD 10bln per factory, FT reports.

INDUSTRIALS:

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  AP Moller Maersk AS (AMKBY) - CEO said that the economic rebound in China was weaker than expected, as customers are stunned from COVID disruptions and a real estate issues, FT reports.


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  Lockheed Martin Corporation (LMT) - Awarded a USD 474mln US Navy contract modification for Trident II missile production and deployed systems support; also awarded a USD 187mln US Navy contract modification.


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  BAE Systems (BAESY) - Awarded USD 537mln US Navy contract for the procurement of engineering services that provide integration, test, and installation of command, control, communications, computers, and intelligence on surface ships.

ENERGY:

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  ConocoPhillips (COP) - CEO doubled down on Alaska oil as competitors leave the Arctic, WSJ reports. CEO said Alaska will provide much-needed crude for decades to come.


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  Ecopetrol SA (EC) - Said that, with regards to statements in the public media about a possible acquisition by Ecopetrol S.A. of the company Monomeros Colombo Venezolanos SA, Ecopetrol warns the public that, within the framework of its 2040 strategy and business plan announced to the market, it is not advancing in discussions regarding possible transactions involving this company. Board appoints Alberto Consuegra Granger as interim CEO effective April 1st, and until the date on which the successor to Felipe Bayon Pardo is appointed.

UTILITIES:

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  PPL Corporation (PPL) - Reiterated its FY23 EPS outlook between USD 1.50-1.65 (exp. 1.59), and continues to see annual EPS growth between +6-8% through at least 2026.

HEALTH CARE:

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  Illumina, Inc. (ILMN) - Responding to activist investor Carl Icahn’s nominees to the Illumina Board, management said the nominees lack relevant skills and experience, adding that neither Icahn or his nominees had the ability to accelerate the legal and regulatory processes.


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  BridgeBio Pharma, Inc. (BBIO) - BridgeBio is attracting takeover interest from bigger drug companies, and some large pharmaceutical companies are studying a potential acquisition of the biotech firm, Bloomberg reports. The report added that deliberations were ongoing, with no certainty of a deal, while BridgeBio could also decide to remain independent longer so it can benefit from the results of upcoming drug trials.


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  Humana Inc. (HUM) - Positive mention in Barron’s, which said the stock was a buy as a bet on healthcare for seniors.


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  Novartis (NVS) - Kisqali Phase III NATALEE trial meets primary endpoint at interim analysis demonstrating clinically meaningful benefit in broad population of patients with early breast cancer.


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  Roche (RHHBY) - COLUMVI receives Health Canada authorisation for patients with relapsed/refractory diffuse large b-cell lymphoma.

27 Mar 2023 - 09:30- Fixed IncomeData- Source: Newsquawk