US EARLY MORNING: US equity futures are lower amid global risk-off; Fedspeak, consumer sentiment and earnings ahead

US PREMARKETS: US index futures are trading lower, with the global macro mood soured after soft trade data out of the world’s second largest economy China, where imports slumped on subdued domestic demand, while export growth fell by the largest margin since the pandemic’s start. Among the indices, the small cap Russell 2000 is leading the losses, continuing its underperformance. Treasury futures have been rising amid the risk off, but are off best levels – the long-end is outperforming, allowing the curve to bull-flatten ahead of today’s upsized Treasury supply. Some desks, like Morgan Stanley, have suggested that fiscal dynamics are increasingly becoming a focus, and follows Fitch Ratings' downgrade of US last week, which came along with a warning that the fiscal trajectory is set to deteriorate over the coming years. That said, many analysts note that Treasuries are seeing buying interest on dips, with yields said to be at attractive levels, and amid fears of a growth slowdown ahead. The Dollar Index is higher as risk sensitive currencies sag. Crude prices are also red, in keeping with the macro mood, while the street expects only modest crude stockpile draws this week. Today’s US focus will be on Fedspeak; 2023 voter Harker is due to give remarks, and traders will be looking to see if he thinks the Fed is now done with hikes; 2024 voter Barkin is also due to speak today. On the data slate, IBD/TIPP economic optimism data for the month will provide an early glimpse of how consumers are faring at the start of August, while traders will also be focussed on any price commentary within the report ahead of Thursday’s CPI release.

CHINA TRADE: China's trade surplus widened to USD 80.6bln in July (exp. 70.6bln, prev. 70.6bln), with imports dropping to a rate of -12.4% Y/Y (exp. -5.0%, prev. -6.8%), reflecting weaker domestic demand, while exports fell by the largest margin since the pandemic's start, falling further to -14.5% Y/Y (exp. -12.5%, prev. -12.4%); the decline was due to lower prices rather than lower quantities. CapEco says exports could decline more before stabilising toward the end of the year, while imports might improve due to increased infrastructure spending and recovering international travel.

TODAY’S AGENDA:

• Our interactive calendar can be accessed here; a pdf version can be found here.


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  EUROPEAN DAY: The main releases today are the ECB's Economic Bulletin pre-release, which will cover why housing has lost its allure; additionally, the ECB's consumer expectation survey for June will be published. On the supply front, Germany will sell EUR 4bln of 2028 BOBLs.


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  NORTH AMERICA DAY: The latest IBD/TIPP Economic Optimism for August will give an early glimpse of consumer sentiment in the month, NFIB Business Optimism Index for July is due, and international trade data for June. Fed's Harker (2023) is due to make comments, and traders will be looking to see if he now thinks the FOMC is done with hikes (in June, before the latest hike, he said the Fed was almost at the point it could sit on rates for a while). Elsewhere, Fed's Barkin (2024) will speak on recessions.


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  US CORPORATE EARNINGS: The major releases on today’s slate includes: UPS, LLY, DUK, ZTS, TDG. Our Daily US Earnings Estimates sheet can be accessed here.


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  ENERGY: The API will release its weekly gauge of energy inventories after the US close; this week, analysts expect to see headline crude stocks draw 0.2mln, distillates draw 0.2mln and gasoline to build 0.2mln.

EQUITY NEWS:

FINANCIALS:

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  US Banks - Ratings agency Moody's downgraded some US banks, and warned of possible cuts to others. Downgraded M&T's (MTB), Old National (ONB), Associated Banc-Corp (ASB), BOK Financial (BOKF), Webster (WCFB), Fulton (FULT), Pinnacle Financial Partners (PNFP). Also placed the following banks on review for downgrade: Bank of New York Mellon (BK), US Bancorp (USB), Truist (TFC), State Street (STT), Northern Trust (NTRS). The CRA said that "many banks' Q2 results showed growing profitability pressures that will reduce their ability to generate internal capital," adding that this came "as a mild US recession is on the horizon for early 2024 and asset quality looks set to decline, with particular risks in some banks’ commercial real estate portfolios." Affirmed ratings for Ally Financial (ALLY), Fifth Third Bancorp (FITB), Regions Financial (RF).


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  HSBC (HSBC) - The UK bank was accused of "putting profits before human rights" after an executive at the company suggested Britain was too tough on China, according to the Telegraph.


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  Apollo Global Management (APO) - Apollo plans to raise up to USD 1.15bln for its Athene unit via sale of convertible stock, Bloomberg reported. The funds will be used to seize opportunities in the current market. Due to rising interest rates, Apollo aims to capitalise on profitable chances as deal volumes decrease, BBG said. Apollo's recent success is largely attributed to its Athene annuities business, which made up 80% of its Q2 income.


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  Italian Banks - Prime Minister Meloni's cabinet approved a surprise tax on the "extra profits" of banks this year, according ANSA.


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  FS KKR Capital (FSK) - Q2 adj. net interest income of +16% Y/Y to 0.78 (exp. 0.75), Q2 net asset value USD 24.69/shr (vs 24.93 at end-March, and 24.89 at end-Dec).

TECH:

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  Softbank (SFTBY) - Reported a surprise loss in Q1, and is now on a run of three straight quarters of losses. Q1 net was JPY -477.6bln (exp. 73bln), profit before tax JPY -176bln (exp. +169bln). The Vision Fund, however, saw an investment gain of JPY 160bln, following a run of five straight quarters of losses.


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  Apple (AAPL) - Apple is testing the next-generation M3 Max chip, Bloomberg reports. The chip will replace the M2 Max, and is set to be used in new MacBook Pro models next year, according to Macrumors.


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  Palantir (PLTR) - Rose 2.6% afterhours following results, buyback announcement. Q2 adj. EPS 0.05 (exp. 0.05), Q2 revenue USD 533.3mln (exp. 532.7mln), Q2 customer count +38% Y/Y, +8% Q/Q, with US commercial customer count +35% Y/Y. Board authorised a stock repurchase programme of up to USD 1.0bln. Sees Q3 revenue between USD 553-557mln (exp. 552.1mln). Lifts FY23 revenue outlook to USD 2.212bln+ (exp. 2.21bln, prev. 2.185-2.235bln).


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  Skyworks (SWKS) - Down 1.3% afterhours post-results. Q3 EPS 1.73 (exp. 1.70), Q3 revenue USD 1.07bln (exp. 1.07bln). Raises quarterly dividend +10% to 0.68/shr. Sees Q4 EPS at 2.10 (exp. 2.11), and Q4 revenue between USD 1.19-1.24 (exp. 1.22bln).


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  RingCentral (RNG) - Tumbled 12% after it announced new CEO; CFO Tarek Robbiati appointed new CEO. Q2 EPS 0.83 (exp. 0.75), Q2 revenue USD 539mln (exp. 536.2mln). Announced RingSense for Phone, and unveiled its RingCX contact centre solution. Sees Q3 EPS between USD 0.75-0.78 (exp. 0.82), and sees Q3 revenue between USD 552-556mln (exp. 553.7mln). Reiterates FY23 EPS outlook for between 3.11-3.25 (exp. 3.23), and reiterates FY23 revenue view to between USD 2.19-2.21bln (exp. 2.20bln).


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  Five9 (FIVN) - Fell around 5% afterhours. Reported Q2 adj. EPS of 0.52 (exp. 0.39), Q2 revenue USD 222.9mln (exp. 214.2mln). Growth continues to be driven by Enterprise business, where LTM subscription revenue +28% Y/Y. Five9 to acquire data integration and analytics company Aceyus, no terms disclosed. Sees Q3 adj. EPS between 0.42-0.44 (exp. 0.43), and sees Q3 revenue between USD 223.5-224.5mln (exp. 228mln). Lifts FY23 EPS outlook to between USD 1.79-1.83 (exp. 1.77, prev. 1.73-1.77), and lifts FY23 revenue outlook to between USD 908-910mln (exp. 908.3mln, prev. 906-909).


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  Compass (COMP) - Q2 EPS -0.10 (exp. -0.05), Q2 revenue USD 1.5bln (exp. 1.51bln). Q3 revenue seen between USD 1.3-1.4bln (exp. 1.37bln).Exec said it was in position to achieve its goal of being FCF positive in 2023.

COMMUNICATIONS:

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  Paramount Global (PARA) - Share prices jumped 4.5% afterhours following results. Q2 adj. EPS 0.10 (exp. 0.00), Q2 revenue USD 7.62bln (exp. 7.43bln). Confirms KKR (KKR) to acquire Simon & Schuster from Paramount for USD 1.62bln; CFO said it will realise USD 2.2bln of gross proceeds from sale of book publisher. Q2 quarterly DTC advertising revenue +21%, driven by higher impressions for Paramount+ and Pluto TV. Q2 Paramount+ revenue grew 47% and reached about 61mln subscribers in the quarter; Q2 net additions +700K (exp. 1.1mln). Expects 20% growth in average revenue per user on Paramount+ in 2024.

MATERIALS:

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  Glencore (GLNCY) - The materials company's mid-year profit fell 50% as commodity prices retreated. H1 sales USD 107.4bln (exp. 106.2bln), H1 adj. EBITDA USD 9.40bln (exp. 10.06bln), net USD 4.57bln (exp. 4.70bln). Announced a new USD 1.2bln share buyback programme (down Y/Y), and it is holding back USD 2bln in cash while it bids to buy Teck Resources (TECK) coal business.


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  Celanese (CE) - Fell 2.2% afterhours. Q2 adj. EPS 2.17 (exp. 2.48), Q2 revenue USD 2.8bln (exp. 2.96bln). Sees Q3 adj. EPS between USD 2.00-2.50 (exp. 3.05). Said current demand and competitive backdrop remains volatile and unpredictable, but expects contributions from actions will support strong 2023 cash generation and continued earnings growth across H2.


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  International Flavors & Fragrances (IFF) - Shares slid 19% lower afterhours after earnings miss and guidance cut. Q2 adj. EPS 0.86 (exp. 1.10), Q2 revenue USD 2.9bln (exp. 3.07bln); continued customer destocking and volume pressures in Q2 reflect the broader macroeconomic challenges facing the industry, exec said, softness was largely isolated in our Functional Ingredients business. Lowers FY23 revenue outlook to USD 11.3-11.6bln (exp. 12.2bln, prev. 12.3bln); exec said volumes in H2 will not recover as previously expected, driven particularly by continued customer destocking. Now sees FY volumes down mid- to high- single digits (prev. saw flat).

ENERGY:

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  TotalEnergies (TTE FP) - Port Arthur refinery in Texas (200k BPD) to shut crude and gasoline units for overhaul on August 18th.


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  Nucor (NUE), NextEra Energy (NEE) - Nucor signs agreement with NextEra to support solar energy development in Kentucky; project's first phase to begin construction in fall 2023, expected to begin commercial operation in December 2025.


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  ONEOK (OKE) - Up 0.3% afterhours post-results. Q2 EPS 1.04 (exp. 1.02). Lifts FY23 revenue outlook; sees net income midpoint at USD 2.49bln (prev. saw 2.41bln), sees diluted EPS midpoint at 5.54 (prev. 5.36), and sees adj. EBITDA midpoint of USD 4.675bln (prev. 4.575bln).

INDUSTRIALS:

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  Aecom (ACM) - Q3 adj. EPS 0.94 (exp. 0.94), Q3 revenue USD 3.66bln (exp. 3.48bln). Narrows FY23 EPS outlook to between USD 3.63-3.73 (exp. 3.7bln, prev. 3.55-3.75).

CONSUMER STAPLES:

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  Beyond Meat (BYND) - Tumbled 8% afterhours following earnings. Q3 EPS -0.83 (prev. 1.53 Y/Y), Q3 revenue USD 102.1mln (exp. 108.5mln). Exec said ongoing category headwinds compressed net revenues, which impacted product sales mix and gross margins. Now sees FY net revenue between USD 360-380mln, lowered from the previous view of between USD 375-415mln; no longer sees positive FCF in H2.


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  Chegg (CHGG) - Shares rose 25% in afterhours following results and guidance. Q2 EPS 0.28 (exp. 0.29), Q2 revenue USD 182.9mln (exp. 176.5mln). Q3 revenue seen between USD 151-153mln (exp. 152.4mln). Exec noted year-over-year customer acquisition and retention rates improved, noted the launch of its beta generative AI experience in May, said feedback has been positive.


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  Hims & Hers (HIMS) - Shares jumped by 16% in extended trade post results. Q2 EPS -0.03 (exp. -0.05), Q2 revenue USD 207.9mln (exp. 205.0mln). Exec said the quarter marked a significant turning point. Sees Q3 revenue between USD 217-222mln (exp. 213.8mln). Boosts FY23 revenue outlook to between USD 830-850mln (exp. 830mln) from 810-830mln.


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  BellRing Brands (BRBR) - Q3 adj. EPS 0.34 (exp. 0.32), Q3 revenue USD 445.9mln (exp. 440.5mln). Lifts FY23 revenue outlook to between USD 1.63-1.67bln (exp. 1.64bln) from USD 1.61-1.66bln.

CONSUMER CYCLICAL:

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  Lucid (LCID) - Rose 3.1% afterhours following results. Q2 EPS -0.40 (exp. -0.33), Q2 revenue USD 151mln (exp. 175mln). Said it was on track to achieve annual production guidance of more than 10k vehicles. A2 adj. EBITDA loss USD 710.3mln (exp. loss of USD 596.1mln). Customer deliveries 1,404.

HEALTHCARE:

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  Bayer (BAYRY) - Q2 revenue EUR 11.04bln (exp. 11.06bln), adj. EBITDA EUR 2.527bln (exp. 2.622bln), net income EUR -1.887bln (exp. +1.128bln). Booked an extraordinary expense of EUR 2.49bln related to an impairment test in the Crop Science division. Reaffirms outlook issued in July; sees crop science down significantly, mainly due to sharply reduced volumes and prices at glyphosate. Earnings also impacted by inflation-related increases in production costs and negative currency effects. Consumer Health saw increased sales and earnings higher slightly. Exec said it was particularly affected the regions of North and Latin America as well as Europe/Middle East/Africa and led to a drop in sales for herbicides. Excluding glyphosate, the rest of the division's business was at the previous year's level, with higher prices offset by lower sales. Sales of corn seed and plant traits increased – ​​thanks in particular to price increases in all regions and increased acreage in North America.

08 Aug 2023 - 09:30- EquitiesData- Source: Newsquawk