US EARLY MORNING: US equity futures are little changed, as are Treasury yields and the USD; focus is shifting onto the heavy central bank slate in the second part of the week

US PRE-MARKETS: US equity futures are once again trading with a directionless bias, Treasury yields are little changed, while the Dollar Index is flat. Crude futures are continuing to gain on fundamentals and sentiment. The focus is now shifting to the numerous central bank announcements due in the coming days (FOMC on Wednesday, preview below; BoE, SNB, Norges, Riks on Thursday; BoJ on Friday). Additionally, traders are keeping an eye on the labour negotiations between automakers and unions; the UAW has threatened further industrial action if a deal cannot be struck by the end of Friday, while the Unifor union in Canada has extended talks with Ford amid some signs of progress (See Equity News section, below).

JPM STAYS OW ENERGY/COMMODITIES: JPM strategist Marko Kolanovic notes that equities are up YTD on multiple expansion while real rates and cost of capital are moving deeper into restrictive territory. "History suggests this relationship is becoming increasingly unsustainable, with the S&P 500 multiple over-valued by 3-4x vs real rates, posing risk to valuations, especially since earnings expectations already face a high hurdle for 2024." Despite the bond sell-off taking yields back toward cyclical highs, the risk of hawkish surprises from the Fed and BoJ, as well as a possible US government shutdown, is keeping JPM neutral on duration. "While risk markets continue to trade in a benign fashion, the news over the past week are in our opinion reducing rather than increasing the chances of soft landing; higher oil prices, inflation persistency, geopolitics and the risk of steeper curves, all reduce the chances of soft landing going forward," Kolanovic says, "we stay overweight energy/commodities as we see room for a further rise in commodity prices, and investor allocations remain low."

TODAY’S AGENDA:

• Our interactive daily calendar is available here; a pdf version can be downloaded here.


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  EUROPEAN DAY AHEAD: Final HICP data for August is expected to be unrevised. ECB's Elderson will speak at a Banking Union conference. Germany Finance Minister Lindner will speak at a finance conference. UK will sell GBP 2.75bln of 2053 Gilts.


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  US DAY AHEAD: Canada headline inflation is expected to tick up to 3.8% Y/Y in August from 3.3% in July. US building permits are seen paring back a touch in August. Weekly RedBook data is also due today. The Treasury will auction USD 13bln of 20yr Bonds.


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  ENERGY: After the close, the API will report its gauge of weekly energy inventories; this week, the street expected headline crude stocks to draw 2.7mln bbls, distillates to draw 0.7mln, while gasoline stocks are seen drawing down by 0.5mln.


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  FOMC PREVIEW (WEDS 20/SEP, 19:00BST/14:00EDT): The FOMC is expected to hold rates between 5.25-5.50% on Wednesday, according to both the market consensus and money market pricing. Traders will be looking to the updated economic projections to see whether the central bank is still working on the assumption that it will hike interest rates once more in 2023, in line with its previous SEP, or whether it now sees rates as having reached terminal. Markets are currently suggesting that the Federal Funds Rate has already reached terminal, though it has assigned around 50/50 chances that we could see another hike this year. Looking ahead, markets are pricing rate cuts next year, with the first fully discounted cut seen in July 2024. Fed officials have been dismissing any talk of rate cuts, and have suggested that rates could be held at terminal levels for an extended amount of time as the Fed continues to try and bring price growth back in line with its target. (Full Newsquawk preview here).

EQUITY NEWS:

CONSUMER:

• 
  Automakers - UAW President said the union would announce fresh strikes on additional plants on Friday at 12:00EDT if there was no serious progress made in talks.


• 
  Ford (F) - Ford faces another potential strike in Canada, Axios reports. Ford and the Unifor union representing about 5,100 auto workers in Canada remain far apart on a new contract as a midnight deadline passed adding to the labour troubles the automaker is already facing in the US. The report adds that unlike the UAW's high-profile strike against Detroit's Big Three automakers, Unifor has been quietly bargaining with Ford over wages, pensions and the transition to electric vehicles. Unifor said it was extending negotiations with Ford for 24hrs after having received a substantive offer minutes before the deadline.


• 
  Stellantis (STLA) - The automaker could close 18 facilities under UAW deal, CNBC reports, but could also repurpose an idled vehicle assembly plant in Illinois. The proposal was made before the start of targeted UAW strikes against Stellantis, Ford and GM, and the plans would likely affect thousands of UAW members, shrink the automaker’s North American footprint and create a new "modernised" parts and distribution network, CNBC said. Stellantis has said that it is "committed" to a solution for its Illinois plant, and noted that it resumed negotiations with UAW union on Monday.


• 
  AutoZone (AZO) - AutoZone announced leadership changes as part of its Transition Plan. Tom Newbern is now COO, Jamere Jackson is the new CFO, Bill Hackney is the Executive Vice President of Merchandising, Marketing, and Supply Chain. Three other Executive Committee members will retire, and replacements are being actively sought.


• 
  Nio (NIO) - NIO plans to raise USD 500mln through convertible senior notes due in 2029, and another USD 500mln due 2030, depending on market conditions. The funds will be used to buy back existing debt and strengthen the company's financial position.


• 
  Ulta Beauty (ULTA) - Kecia L. Steelman has been appointed as President and Chief Operating Officer of Ulta Beauty.

TECH:

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  Microsoft (MSFT) - Microsoft's AI research team accidentally shared private data on GitHub, Bloomberg reports. Cloud security company Wiz discovered the data leak due to a misconfigured link. This exposed Microsoft employees' personal data and messages. Separately, Microsoft plans to stream PC games through its Azure servers on Xbox Cloud Gaming, The Verge reports, citing internal emails from the FTC vs Microsoft case. This expands beyond Xbox titles currently available on the service, the report adds; additionally, it IGN reported that it seems like Microsoft is preparing for a mid generation refresh of the Xbox Series X and S consoles for release during August and October 2024, respectively.


• 
  SoftBank (SFTBY), Arm Holdings (ARM) - SoftBank said that the closing of Arm IPO and full exercise of underwriters option to purchase additional American Depository Shares, adds in six-month period ending September 30th, it expects to receive proceeds from disposal of USD 5.123bln.


• 
  Oracle (ORCL) - CEO told CNBC that it is continuing to accelerate its growth path, noted that the company has much demand, and it keeps booking it. In the first week this quarter, CEO said it booked USD 1.5bln of just AI workloads. Added that moving the Cerner business into the cloud was causing some near-term headwinds.


• 
  Block (SQ) - Block CEO Alyssa Henry will leave the company on October 2nd. Chair Jack Dorsey will take on the role of Square Head for now.


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  Lyft (LYFT) - The ride hailing company paid USD 10mln to settle probe into Icahn's stake sale before the company's IPO, FT reports.

COMMUNICATIONS:

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  ByteDance (not listed) - A group of 18 state attorneys generals supports Montana's effort to ban TikTok, claiming the app engages in deceptive practices, risking personal data access by the Chinese Communist Party and harming children, Reuters reports. TikTok is challenging the ban, with a hearing scheduled for October 12th.

INDUSTRIALS:

• 
  Airline Stocks - On September 15th, the union leadership representing Air Transport International (ATI) pilots unanimously voted to give the chair authority to call for a strike authorisation vote which would permit a strike if the National Mediation Board releases the parties to self-help under the Railway Labor Act.

ENERGY:

• 
  EQT Corporation (EQT) - EQT has agreed to use Commonwealth LNG's facility in Louisiana to make 1 million tons of LNG annually for 15 years. The project's details are still being worked out, and it's expected to start in 2027.

MATERIALS:

• 
  United States Steel (X) - The steelmaker sees Q3 adj. EPS between USD 1.10-1.15 (exp. 0.91), reflecting the impact of UAW union strike. Its shares rose 3% in after-hours trade, with competitors CLF, NUE, and STLD also seeing some attention too.

19 Sep 2023 - 09:30- Research Sheet- Source: Newsquawk