US EARLY MORNING: US equity futures are higher ahead of PPI, weekly jobless claims data and Fedspeak

OVERNIGHT: On Wall Street, stocks were mixed (Dow underperformed, Nasdaq outperformed) as Treasury yields narrowed following US CPI data, which didn’t contain any hawkish surprises, as some were fearing following hot payrolls last week. Afterhours, DIS slipped following its results, HOOD gained. Our US wrap can be accessed here. APAC stocks were also mixed. China reported softer inflation data which supported arguments of a slow economic rebound ahead, while factory g ate prices saw deeper deflation (we review in our day ahead section, below). Aussie share markets saw weakness in utilities and commodity sectors overshadowing outperformance in tech and after consumer inflation expectations ticked higher. Japanese shares were indecisive, and the BoJ’s Summary of Opinions provided very little in the way of fresh insight. Our APAC wrap is here. In Europe, indices were in the green after the open, though the UK's FTSE 100 was lagging ahead of today's BoE rate decision, where a 25bps hike is largely expected. ECB's German representative Nagel reiterated that rate hikes are not over, and the ECB has more to do. Our European cash open note is here.

US PRE-MARKETS: US equity futures are higher in pre-market trade, Treasury yields are mixed. The Dollar Index is rallying, perhaps helped by a lower CNH (soft CPI metrics – we recap below), and lower EUR (signs of slowing global growth, along with some dovish commentary from ECB officials this week). Oil is finding its footing after Wednesday’s slide; macro data implies a growth slowdown ahead, while this week’s inventory data saw a larger than expected crude build, but some are framing today’s upside on the bigger than expected decline in gasoline stocks, which could allude to strong demand for transportation fuels. Today, weekly claims data, PPI, and Fedspeak are the main focus for US traders, while any commentary on the debt ceiling will be looked to; Treasury Secretary Yellen has given remarks ahead of the G7 meetings in Japan, and reiterated the urgency for Congress to raise the debt ceiling, and cautioned that a US default would result in economic and financial catastrophe.

ASSET ALLOCATION: In its May asset allocation update, Pimco says the Fed is likely to pause its rate cycle rather than quickly pivot toward rate cuts. Still, history suggests fixed income can offer attractive return potential, especially relative to equities. Pimco says it favours bonds for their diversification, capital preservation, and upside opportunities. "Starting yields appear competitive and we favour high quality duration and liquid credit exposures, as well as US agency mortgage-backed securities," it said. It believes that the overall resilience seen in equity markets this year would diminish in a downturn. "Earnings expectations appear too high, and valuations too rich," it says, adding that it is underweight equities in its multi-asset portfolios. Within these multi-asset portfolios, it sees opportunities in emerging Asian markets, particularly areas likely to benefit from economic growth in China.

DAY AHEAD:

• Our interactive Day Ahead calendar is here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: The Bank of England is expected to lift interest rates by 25bps to 4.50% in a 7-2 vote, analysts predict, and BoE Governor Bailey will deliver a press conference following the announcement; our full preview can be accessed here. There is not much else on the data slate, but there will be remarks from the Riksbank’s Floden (again!), ECB’s markets chief Schnabel and ECB VP de Guindos. Italy will sell EUR 7.5-8.75bln of 2026, 2030 and 2043 debt.


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  PREVIEW - BOE POLICY ANNOUNCEMENT (12:00BST/07:00EDT): Expectations are for the BoE to deliver a 25bps hike in the Base Rate to 4.5%, according to 55/56 analysts surveyed by Reuters, with just one looking for unchanged. Market pricing concurs with economists as 25bps is priced at around 85%. Dovish dissent from Tenreyro and Dhingra is expected once again. Focus will be on any hints over a potential pause in the current hiking cycle. Full Newsquawk preview can be accessed here.


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  US DATA/SPEAKERS: Treasury Secretary Yellen will be delivering comments in the premarket ahead of the G7 meetings in Japan; Yellen is expected to reiterate her sharp warnings on the debt ceiling, and urge policymakers to act. Fed Governor Waller, who usually tilts hawkish, will deliver remarks. Data-wise, PPI data will be eyed to see if the headlines it comes in cooler, similar to the CPI data on Wednesday; after the hot payrolls data, some had expected an upside surprise. Weekly initial jobless claims and continuing claims data are expected to tick up a touch: initial is seen +3k to 245k, while the continuing claims measure is seen rising to 1.82mln from 1.805mln. On the supply front, the US will sell USD 21bln of 30yr, and the Treasury will also announce the size of next week’s 20yr bond supply.


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  US CORPORATE EARNINGS: The highlights on today earnings slate includes JD; our Daily US Earnings Estimates note can be accessed here.


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  ENERGY: The EIA weekly NatGas storage change data is expected to show a build of 74BCF (vs last week’s build of 54BCF). OPEC will release its MOMR.


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  RECAP - CHINA CPI: Chinese CPI rose +0.1% Y/Y in April (exp. 0.4%, prev. 0.7%), the slowest rate of increase since February 2021; the monthly measure fell 0.1% (exp. unch). Producer prices declined -3.6% Y/Y in April (exp. -3.2%, prev. -2.5%). Pantheon Macroeconomics noted that inflation was weak as the country reopens, and the recovery is lopsided amid feeble global demand and increased output, where consumers were spending more on restaurants, leisure services and tourism, after the ending of zero-Covid policy, but less so on goods. "The divergence between services and goods inflation is likely to continue, as the services rebound outpaces domestic spending on goods," Pantheon says, "the government is likely to provide only targeted consumption measures in the next couple of months, but we see an increasing chance that slowing growth in Q2 will prompt a broader policy response in H2."

EQUITY NEWS:

FINANCIALS:

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  Blackstone (BX), Regional Banks (KRE) - Blackstone is in talks with large US regional banks about providing them with extra firepower to lend to companies amid signs the recent industry turmoil is morphing into a credit crunch, FT reports. Blackstone said the partnerships would involve lenders making or originating loans that the private equity group can funnel to its insurance customers.


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  Silicon Valley Bank (SIVB) - FDIC said Blackstone (BA) and Apollo (APO) were among about 20 bidders for some assets of collapsed Silicon Valley Bank, Reuters reports. PNC Financial (PNC), Valley Bank, Citizens Bank and BankUnited (BKU) were also among the bidders.


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  Sixth Street Specialty Lending (TSLX) - Slipped over 4% afterhours following an announcement that it has launched a public offering of 4.5mln shares of its common stock. The net proceeds will be used to pay down outstanding debt under its revolving credit facility.


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  ING (ING) - Q1 numbers beat expectations, and it launched a share buyback. Q1 revenue EUR 5.57bln (prev. 4.60bln), Q1 NIM 1.59% (prev. 1.37%), Q1 NII EUR 4.01bln (prev. 3.42bln Y/Y). Q1 net income EUR 1.59bln (exp. 1.18bln), Q1 loan-loss provisions EUR 152mln (exp. 405.7mln). Announces EUR 1.5bln share buyback.


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  Mr. Cooper (COOP) - Mr. Cooper Group to acquire Home Point Capital for USD 324mln in cash.

COMMUNICATIONS:

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  Disney (DIS) - Disney slipped almost 5% in afterhours trading; although it saw lower streaming losses in the quarter, it lost 4mln Disney+ subscribers, mainly in India after it recently lost streaming rights to IPL cricket matches, while it thinks continued softness in Disney+ subscribers could linger into Q3. Q2 adj. EPS 0.93 (exp. 0.93), Q2 revenue USD 21.82bln (exp. 21.79bln). Segments: Q2 Media and entertainment distribution revenue USD 14.04bln (exp. 14.16bln); Parks, experiences and products revenue 7.78bln (exp. 7.67bln). Subscribers: Total Disney+ paid subscribers 157.8mln (exp. 163.1mln), Disney+ ARPU 4.44 (exp. 4.36); ESPN+ subscribers 25.3mln (exp. 25.5mln); Hulu & Live TV subscribers 4.4mln (exp. 4.50mln); Total Hulu subscribers 48.2mln (exp. 48.6mln). Disney to offer Disney+ app that includes Hulu. Is on track to meet or exceed its USD 5.5bln cost cuts target, will increase price of ad-free Disney+ streamer. Will launch ad-supported Disney+ in Europe by year-end.


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  Meta Platforms (META) - A judge ruled that CEO Mark Zuckerberg and some former directors of the social media company must face accusations that they ignored privacy violations, including allowing Cambridge Analytica to gather information on millions of Facebook users, Bloomberg reported. The judge said that the Facebook board had conflicts of interest and could not be trusted to investigate these accusations, the report added, and that board members either went along with the improper behaviour or ignored it.


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  Deutsche Telekom (DTEGY) - Upped its profits outlook after Q1 numbers topped expectations. Q1 revenue EUR 27.8bln (exp. 23.8bln), Q1 adj. net EUR 1.8bln (exp. 1.85bln). Raises FY23 adj. EBITDA AL guidance to 40.9bln (prev. view 40.8bln).

TECH:

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  SoftBank (SFTBY) - Q1 net JPY -970.14bln (prev. -1.71tln), Q1 pretax loss JPY 469.1bln (prev. loss of 869.56bln). It saw a record loss for its Vision Fund on startups valuation cut (loss of JPY 4.3tln vs a loss of JPY 2.55tln Y/Y). Exec siad that for private portfolio companies, the fair value decreased in a wide range of investments, mainly reflecting markdowns of weaker-performing companies and share price declines among market comparable companies.


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  Foxconn (HNHPF) - Q1 net TWD 12.8bln (exp. 29.18bln). Sees Q2 revenue decline Y/Y, and for computing products to slightly decline Y/Y, and sees components & other products sales flat; sees FY revenue flat Y/Y. Said Computing products and components/other revenue to have significant growth in the FY. Exec said it retained a conservative outlook for business this year, due to global economic uncertainties. Profit decline was due to assets write-off from non operational business.


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  Robinhood Markets (HOOD) - Up over 3% afterhours following results where higher interest rates boosted interest income; Q1 EPS -0.57 (exp. -0.61), Q1 revenue USD 441mln (exp. 420mln), adj. EBITDA 115mln (exp. 94.4mln). Assets under custody USD 78bln (exp. 72.3bln). WSJ reports HOOD will launch 24hr trading on weekdays in stocks and ETFs which all customers will have access by next month.


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  Apple (AAPL) - Italy antitrust regulators open probe into Apple over alleged abuse of app market dominance, Reuters reports.


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  Intel (INTC) - Boston Consulting announced a strategic collaboration to enable generative AI using end-to-end Intel AI hardware and software.


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  Siltronic (SLTCY) - Posted subdued results, and sees no recovery in H2 as end markets are expected to stagnate. Q1 revenue EUR 404mln (exp. 406mln), Q1 EBITDA EUR 125mln (prev. 168.1mln).


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  Sonos (SONO) - Tumbled over 23% in afterhours trade after slashing its FY outlook; Q2 EPS 0.04 (vs 0.26 Y/Y), Q2 revenue USD 304.2mln (exp. 298mln). Exec said although Q2 results were in-line with its guidance, it is reducing expectations for H2 due to softening consumer demand, and channel partner inventory tightening. Noted that the company was profitable and debt free. Cuts FY23 revenue view to between USD 1.625-1.675bln (exp. 1.73bln) from 1.7-1.8bln, and cuts FY23 adj. EBITDA outlook to between USD 138-168mln from 145-180mln.


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  Corsair Gaming (CRSR) - Q1 adj. EPS 0.11 (exp. 0.10), Q1 revenue USD 354mln (exp. 352.2mln). Exec said "enthusiast-level consumers" continue to build new gaming PCs at a rate significantly above pre-pandemic levels. Said The broader market for gaming peripherals is also holding up at a level significantly above pre-pandemic levels, although slightly behind 2022 levels, most notably in Europe. Exec is confident that the gaming market will continue to grow off the higher recent levels. Reiterates FY23 revenue outlook for USD 1.35-1.55bln (exp. 1.47bln), and its FY23 adj. EBITDA outlook at USD 90-110mln.


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  Flex (FLEX) - Q4 adj. EPS 0.57 (exp. 0.51), Q4 revenue USD 7.5bln (exp. 7.2bln). Q1 adj. EPS seen between 0.47-0.53 (exp. 0.55), and sees Q1 revenue between USD 7.0-7.5bln (exp. 7.5bln). For the FY24, sees adj. EPS between 2.35-2.55 (exp. 2.42), and sees FY24 revenue between USD 30.5-31.5bln (exp. 30.6bln).


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  DoubleVerify (DV) - Q1 EPS 0.07 (exp. 0.04), Q1 revenue USD 122.6mln (exp. 118.1mln). Sees Q2 revenue between USD 131-135mln (exp. 132.8mln), and sees Q2 adj. EBITDA USD 37-39mln. Lifts FY23 revenue outlook to 557-569mln (exp. 557.3mln) from 550-564mln.


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  Unity Software (U) - Q1 EPS -0.01 (exp. 0.06), Q1 revenue USD 715mln (exp. 694mln). Sees Q2 revenue between USD 510-520mln (exp. 497mln).


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  Trade Desk (TTD) - Q1 EPS 0.23 (exp. 0.12), Q1 revenue USD 383mln (exp. 364.5mln). Laura Schenkein named new CFO from June, succeeding Blake Grayson, who is leaving the company. Sees Q2 revenues of at least USD 452mln (exp. 445.4mln), and sees Q2 adj. EBITDA at USD 160mln.


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  Alarm Holdings (ALRM) - Q1 adj. EPS 0.41 (exp. 0.31), Q1 revenue USD 209.7mln (exp. 207.6mln); Q1 SaaS and license revenue +9.9% to USD 135.4mln (vs 123.2mln). Exec noted continued momentum across the business. Sees FY23 adj. EPS between 1.55-1.60 (exp. 1.53), and sees FY23 revenue between USD 855.9-881.5mln (exp. 863.6mln); SaaS and license revenue expected to be between USD 555.9-556.5mln (for Q2, sees SaaS and license revenue between USD 137.2-137.4mln).


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  AppLovin (APP) - Q1 EPS -0.01 (exp. 0.07), Q1 revenue USD 715mln (exp. 693.5mln). Sees Q2 revenue between USD 710-730mln (exp. 696.8mln), and sees Q2 adj. EBITDA between USD 280-300mln.

CONSUMER:

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  Nissan (NSANY) - Net Profit +3% Y/Y at JPY 221.90bln, Group Operating Profit +52.5% Y/Y at JPY 377.11bln; sees FY operating income at JPY 520.00bln (est. 402.8bln). Raises dividend. Sees FY23/24 global retail sals of 4mln vehicles.


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  Honda Motor (HMC) - 2022/23 net -1.7% at JPY 695bln; operating profit -3.7% at JPY 839bln; PBT -12.3% at JPY 938bln. Will buyback up to 3.8% of shares for JPY 200bln. Sees FY23/24 Net +15% at JPY 800bln, sees operating profit +19% at JPY 1.0tln, and sees PBT +26% at JPY 1.19tln.


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  Beyond Meat (BYND) - Down 2.2% in afterhours trading following results, mixed shelf. Q1 adj. EBITDA USD -45.8mln (exp. -48mln), Q1 revenue USD 92.2mln (exp. 90.7mln). Reaffirms FY outlook. Planning major retail marketing push, and will continue to explore time-limited pricing programmes. Is targeting positive cash flows in H2. Sees Q2 revenue +15% Q/Q (exp. 122mln), and says FY23 will be more back-end loaded for revenues. Has filed for a universal shelf, which will be used to bolster its balance sheet; has established a UDS 200mln at the market facility for its common stock.


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  Cheesecake Factory (CAKE) - Q1 adj. EPS 0.61 (exp. 0.59), Q1 revenue USD 866.1mln (exp. 871.2mln), Q1 comparable restaurant sales +5.7% Y/Y, and +14.9% vs 2019 levels. Q2 revenue seen between USD 870-890mln (exp. 898.1mln), and said it sees Q2 commodity inflation in the high single-digits. For the FY23, revenue is seen at USD 3.55bln (exp. 3.53bln).


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  Nordstrom (JWN) - Appoints Cathy Smith as CFO, effective May. Smith joins from Bright Health Group, where she served as CFO since 2020.

INDUSTRIALS:

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  Boeing (BA) - Was awarded a USD 216mln contract modification for C-17 Globemaster landing gear spares management services.


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  Crane (CR) - Q1 adj. EPS 1.25 (exp. 0.85), Q1 revenue USD 514mln (exp. 486mln), Q1 core Backlog +17%. Lifts FY23 adj. EPS view to between USD 3.60-3.90 from 3.40-3.70, and now sees FY23 total sales growth of approx. 5% (prev. saw +3%), core sales growth of 4-6% (prev. 3-5%).


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  Crane NXT (CXT) - Q1 EPS 0.76 (vs 0.85 Y/Y), Q1 revenue USD 329.1mln (vs 332.6mln Y/Y). Exec said Crane NXT was off to a great start as an independent company. Q1 core sales growth at Crane Payment Innovations +10%, saw significant margin expansion. Exec also noted strong orders and backlog growth in Crane Currency. Raises FY23 adj. EPS outlook to 3.75-4.05 from 3.65-3.95.


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  Hapag-Lloyd (HPGLY) - Sales topped expectations, though profits fell, and it confirmed guidance. Q1 revenue EUR 5.62bln (exp. 5.34bln), Q1 EBITDA EUR 2.22bln (prev. 4.73bln). Exec said that market environment has normalised, with corresponding declines in demand and freight rates, which will impact earnings ahead. Maintains guidance, but cautions that it could be negatively impacted by the ongoing war in Ukraine, other geopolitical uncertainties and persistent inflationary pressures.


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  Rolls-Royce (RYCEY) - Trading update noted it was on track and flying hours are continuing to recover. Affirms FY Adj. operating profits between GBP 600-800mln.


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  Ritchie Bros. (RBA) - Q1 adj. EPS 0.57 (exp. 0.49), Q1 revenue USD 512.4mln (exp. 430.8mln). Gross Transaction Value growth exceeded its outlook due to accelerated fleet realignment by customers in the latter part of the quarter.

MATERIALS:

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  Thyssenkrupp (TKAMY) - Boosted cash flow guidance despite losses in steel. Q2 revenue EUR 10.1bln (exp. 9.2bln), Q2 adj. EBIT EUR 205mln (exp. 153mln). Guides FCF before M&A to be "slightly positive" (prev. "at least break even").

ENERGY:

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  Tetra Tech (TTEK) - Q2 EPS 1.17 (exp. 1.03), Q2 revenue USD 1.16bln (exp. 826.4mln). Sees Q3 EPS between 1.15-1.20 (exp. 1.21), and sees Q3 revenue between USD 750-800mln (exp. 922.6mln). Sees FY23 EPS between 5.07-5.17 (exp. 5.02), and sees FY23 revenue between USD 3.1-3.2bln (exp. 3.45bln).

HEALTHCARE:

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  Nutrien (NTR) - Q1 adj. EPS 1.11 (exp. 1.49), Q1 revenue USD 6.11bln (exp. 6.43bln). Sees FY adj. EPS between 5.50-7.50 (exp. 8.63).


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  Bayer (BAYRY) - Q1 adj. EBITDA missed expectations, and it said it sees FY23 results at the lower end of guidance ranges. Q1 revenue EUR 14.4bln (exp. 14.6bln), Q1 EBITDA EUR 4.47bln (exp. 4.49bln).


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  Merck (MKKGY) - Revenue was in line with expectations, though it flagged a decline in operating profits for FY23. Q1 revenue EUR 5.29bln (exp. 5.27bln), Q1 adj. EBITDA EUR 1.59bln (exp. 1.56bln), Q1 net EUR 800mln (prev. 884mln Y/Y).

11 May 2023 - 09:00- Research Sheet- Source: Newsquawk