US EARLY MORNING: US equity futures are flat, Treasury yields wider ahead of today's key jobs data

US PRE-MARKETS: US equity futures are trading around flat ahead of today’s key jobs data, that will help inform expectations for future Fed policy (the FOMC meets next week and is likely to keep policy unchanged, but today’s jobs data and next week’s CPI data will set the tone for how much scope the Fed has to cut rates in 2024). Treasury yields are rising ahead of the jobs report, with many attributing the upside as sympathy with JGBs, which have this week come under pressure after BoJ boss Ueda hinted that the central bank could look at exiting negative rates, perhaps as soon as this year. Some are also arguing that aggressive expectations of Fed rate cuts next year are overblown, and the Fed is likely to push back on this next week, which may also be weighing on the complex. The Dollar Index is flat. Crude futures are higher amid some reports that shorts were closing out bearish trades after the slide this week brought oil benchmarks into oversold territory, but crude is still on course for a seventh weekly loss amid signs of a potential supply surplus and a weakening demand-side of the equation.

TODAY’S AGENDA:

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  EUROPE DAY AHEAD: Eurozone Finance Ministers will resume talks on the EU's fiscal rules on debt and deficit reduction. UK watchers will be eying the BoE's inflation attitudes survey ahead of next week's policy meeting. ECB's TLTRO III repayment details will also be published. On the speaker's front, Riksbank's Jansson will give remarks.


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  US DAY AHEAD: The US jobs report is the highlight, and although the rate of payroll additions is expected to tick up, analysts caution against interpreting it as a resurgence of labour market conditions, especially since other proxies suggest a slowing of the market (our preview is below). There will also be attention on the University of Michigan’s prelim consumer sentiment report for December, particularly on the inflation expectations gauges ahead of next week’s CPI data (and FOMC meeting). In the afternoon, Baker Hughes will release weekly rig count data.


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  PREVIEW - US NONFARM PAYROLLS (13:30GMT/08:30EST): While the headline rate of payrolls is seen picking up in November, analysts have cautioned against interpreting it as a sign of labour market resurgence. Indeed, labour market proxies released in the month allude to a slowing of labour market conditions: the weekly initial jobless claims and continuing data for the survey week that coincides with the BLS jobs data ticked up; the ADP's gauge of payrolls, while a poor predictor of the official NFP data, missed expectations; business surveys have also noted that slowdown in hiring. Additionally, the JOLTS data series for October saw a large decline, confirming that the labour market is coming into what Fed officials call "better balance"; officials do not seem concerned about the slowdown, and have suggested that labour market conditions are still very strong. Meanwhile, average hourly earnings are seen rising in the month, but the annual rate is expected to fall slightly. Officials have indicated that they would like to see slower growth and further softening in labour market conditions to help bring inflation back to target. (Newsquawk)

EQUITY NEWS:

TECH:

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  Apple (AAPL) - Apple is expanding iPad development to Vietnam, teaming with assembler BYD, Nikkei reports. The move, starting with entry-level models, signifies a shift in resources outside China for production and manufacturing development, establishing Vietnam as an alternative hub for Apple's device production. Separately, following the acquisition of Wistron's Indian assets, Tata reportedly plans to build a bigger manufacturing facility in southern India to make products for Apple, as Apple suppliers are ramping up investments in a diversification move, Digitimes reports.


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  Amazon (AMZN) - CEO Andy Jassy tells CNBC that generative AI is going to change customer experiences, going to make AMZN's models better. Said the goal for Alexa is to build the world's best personal assistant, AI will be a big part of that.


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  Broadcom (AVGO) - Broadcom logs earnings beat, but stock price slips afterhours as it sees revenues below estimates due to weak enterprise spending. Q4 adj. EPS 11.06 (exp. 10.98), Q4 revenue USD 9.30bln (exp. 9.41bln). Q4 semiconductor solutions revenue USD 7.33bln (exp. 7.27bln), Q4 infrastructure software revenue USD 1.97bln (exp. 1.94bln). Expects to take charges of approximately USD 1.3bln through FY25 for implementation of cost-reduction activities; will provide details of VMWare acquisition related restructuring costs as part of its financial reporting. CEO said it was refocusing VMWare on its core business and divesting non-core assets. Raises quarterly dividend +14% to USD 5.25/shr (prev. 4.60). Guides initial FY24 revenue view 50bln (exp. 45.8bln).


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  Nvidia (NVDA) - Nvidia is in advanced discussions with Malaysian company YTL for a data centre partnership focusing on cloud infrastructure. The deal might centre around YTL's Johor-based data centre complex. Separately, Nvidia CEO unconcerned after a US semiconductor project was removed from a defense bill. Is confident in supply chain security; highlighted manufacturing in Taiwan, Korea, and future US plans at a press conference.


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  Taiwan Semiconductor Manufacturing Company (TSM) - November revenue TWD 206.0bln (prev. TWD 222.7bln Y/Y).


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  Qualcomm (QCOM), Qorvo (QRVO) - Qualcomm downgraded at Morgan Stanley to Equal Weight from Overweight, price target nudged up to USD 132 from USD 119 previously. Downgrade comes as MS moves its industry view of Semiconductors to 'Attractive' from 'In-Line'. MS says its fundamental view is turning more positive on the device side as the inventory correction runs its course and it is shifting its smartphone exposure from defense to offense, and accordingly downgrades Qualcomm and upgrading Qorvo (QRVO) to Overweight from Equal Weight (QRVO PT nudged up to USD 134 from USD 120).


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  Lam Research (LRCX) - Morgan Stanley downgrades Lam Research to Equal Weight from Overweight, maintains PT of USD 720. Moves its industry view on Semiconductor Capital Equipment to 'Cautious' from 'In-Line'. MS notes that capital equipment stocks were outperformers this year, and there are expectations for a DRAM recovery, but MS notes DRAM equipment revenues are already at all time highs.


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  DocuSign (DOCU) - Q3 adj. EPS 0.79 (exp. 0.63), Q3 revenue USD 700.4mln (exp. 690.1mln), Q3 billings USD 691.8mln (+5% Y/Y). Sees Q4 revenue between USD 696-700mln (exp. 693.7mln), and sees Q4 billings between USD 758-768mln. Lifts FY24 revenue outlook to between USD 2.746-2.75bln (exp. 2.7bln) from USD 2.725-2.737bln, and sees FY24 billings between USD 2.835-2.845bln.


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  Darktrace (DRKTY) - Investors have pushed back against Mike Lynch's involvement in the company; Lynch is facing a fraud trial in the US. 57% of shareholders voted against the election of Patrick Jacob as a non-executive director over connection to Lynch, according to The Times.

COMMUNICATIONS:

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  Meta Platforms (META) - New Mexico Attorney General files lawsuit against Meta Platforms and Mark Zuckerberg to protect children from sexual abuse and human trafficking.


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  Spotify (SPOT) - CFO Paul Vogel to leave the company in March. SPOT has launched an external search for his successor. In the interim, Vice President of Financial Planning and Analysis Ben Kung will take on expanded responsibilities to support the company’s realignment of its financial leadership team.


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  T-Mobile (TMUS) - CEO tells CNBC that Q3 was a milestone in smaller markets, rural areas, where it was the share leader in smaller markets in Q3. Ahead, expects more devices to connect directly to 5G networks. Said generative AI was going to lock in the era of 5G with the cloud.


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  UK Telecoms, Vodafone (VOD), EE (BTGOF), O2 (TEF) - UK telecoms companies are facing a GBP 3bln+ class action claim, alleging that market dominance was used to overcharge around 28mln UK mobile contracts. If the lawsuit succeeds, affected consumers could receive as much as GBP 1.8k, Sky News reports.

FINANCIALS/REAL ESTATE:

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  Crown Castle (CCI) - CEO Jay Brown to retire as President, CEO and a director, effective January, and handing a win to activist investor Elliott. Board appointed Anthony Melone, a member of Crown Castle's board, to begin serving as interim CEO at that time. The board will conduct a search process to identify a permanent CEO.


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  Blackstone (BX), Digital Realty Trust (DLR) - Blackstone and Digital Realty join forces to create a USD 7bln venture for data center development, focusing on major online content, cloud service, and AI providers. Blackstone is to make an initial contribution of USD 700mln, according to the WSJ, and will have an 80% ownership stake.

CONSUMER:

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  Tesla (TSLA) - China's CPCA says Tesla exported 16,928 China-made vehicles in November (prev. 43,489 in October)


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  Lululemon Athletica (LULU) - Fell 2.7% afterhours following disappointing Q4 outlook. Q3 adj. EPS 2.53 (exp. 2.28), Q3 revenue USD 2.20bln (exp. 2.19bln). Announces USD 1bln buyback. Sees Q4 EPS USD 4.85-4.93 (exp. 4.93), and sees Q4 net revenue between USD 3.14bln-3.17bln (exp. 3.18bln). For the FY, sees adj. EPS between USD 12.34-12.42 (exp. 12.17), and raises FY net revenue forecast to between USD 9.55bln-9.58bln (exp. 9.58bln; prev. saw 9.51bln-9.57bln).


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  Levi Strauss (LEVI) - CEO Chip Bergh to retire in April 2024. Board elects Michelle Gass, currently president, to succeed Bergh as president and chief executive officer, effective January 2024.


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  RH (RH) - Tumbled 9% afterhours after earnings miss. Q3 EPS -0.42 (exp. +0.95), Q3 revenue USD 751.2mln (exp. 756.7mln). Narrows FY23 revenue outlook to between USD 3.06-3.08bln (exp. 3.08bln) from 3.04-3.1bln, and sees FY23 operating margin between 13.6-14.0% (prev. saw 14.5-15.5%).


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  Post Holdings (POST) - Post Holdings reported avian influenza cases at two third-party contracted egg-laying sites of Michael Foods in Iowa and Ohio, impacting 10% of its egg supply. Does not expect to provide additional updates on specific incidents unless the cumulative effect of subsequent incidents exceeds an additional 5% of Post's controlled supply. Updates outlook; raises FY24 adj. EBITDA view to between USD 1.22-1.28bln (prev. saw USD 1.20-1.26bln).


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  Flutter (PDYPY) - Provided an update on its planned US listing. Said it is working towards an effective listing date for its ordinary shares on the NYSE. Notes Stoxx’s decision to remove Flutter from the Euro Stoxx index will be effective 18th December.

INDUSTRIALS:

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  UPS (UPS) - Teamsters representing UPS workers plan to file unfair labor practice charges and consider striking after about 35 recently organized employees were fired at the Centennial hub in Louisville, Kentucky, Reuters reports. Teamsters General President O'Brien told UPS that Teamsters in Louisville may strike.


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  Airbus (EADSY), Boeing (BA) - Cathay Pacific placed an order to purchase six Airbus A350 freights with a list price of USD 2.71bln to replace Boeing (BA) 747 cargo jets.


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  Rocket Lab USA (RKLB) - Rocket Lab USA is set to launch Korea Advanced Institute of Science and Technology's Earth observation satellite, NeonSat-1, alongside NASA's ACS3 satellite in the first half of 2024 on an Electron rideshare mission from New Zealand's Launch Complex 1.

ENERGY:

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  Shell (SHEL) - Sees a USD 5bln investment opportunity within Nigeria, pledges spending of USD 1bln over 5-10 years to bolster natgas output in the region.

MATERIALS:

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  Anglo American (NGLOY) - Plans cost cuts as price rout takes its toll; sees 2023 production +3%, Quellaveco copper ramp-up and solid iron ore production, offset by ore grades in Chile and lower PGMs and diamonds production. For 2024, production expected -4%, rescheduled to enhance value and cut unit costs which are expected to be -2% as cost discipline more than offsets inflation. Capex USD 5.7bln (prev. guided 6.5bln). For 2025, production expected -3%, to enhance value/cut unit coasts and amid scheduled maintenance. Capex USD 5.7bln (prev. guided 6.1bln). For 2026, production expected +4%.

HEALTHCARE:

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  Cooper Companies (COO) - Q4 EPS 3.47 (exp. 3.48), Q4 revenue USD 927.1mln (exp. 924.8mln). Sees FY24 EPS between USD 13.60-14.00 (exp. 14.04), and sees FY24 revenue between USD 3.81-3.88bln (exp. 3.86bln).


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  Zoetis (ZTS) - Raises quarterly dividend +15% to USD 0.432/shr.

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