US EARLY MORNING: US equity futures are lower; geopolitics and earnings from big retailers is in focus

• 
  OVERNIGHT: Asia-Pac trade was mostly rangebound in absence of any lead from Wall Street, where markets were closed for Presidents' Day. APAC was also digesting earnings and mixed PMI data (see here). The RBA's minutes from its February 7th meeting said the board considered a hike of 25bps and 50bps, while a pause was not an option, and it agreed further increases would be needed over the months ahead. European stocks started the day lower ahead of flash PMI data for February, and after a generally good showing out of the German, French and aggregate Eurozone data, equities slipped as traders reasoned that the data will give the ECB more scope to be aggressive with policy normalisation, if needed; it is worth noting some were citing a haven bid as well, given all the geopolitics today (Biden in Poland, Russia's Putin address, while US warned China on the weekend not to supply Russia with lethal aid).


• 
  US PRE-MARKETS: US equity futures are languishing, in keeping with European peers. Treasury yields are higher by 3-6bps, with underperformance in the belly ahead of this week’s note supply. The Dollar Index is a touch above neutral. Flash PMI data released today will give a glimpse into activity in February, with the Street anticipating some improvement, but not enough to take the three major indices back into expansionary territory. Geopolitics will be in focus as President Biden visits Poland to mark the one-year anniversary of Russia’s invasion of Ukraine; Biden’s Russian counterpart has been giving an address, where he will outline his intentions for the next year. On the earnings front, traders will be watching results from Walmart (WMT) and Home Depot (GD); analysts at JPMorgan have suggested that results from these two will set the tone for how stocks could trade in the near-term; there will be particular focus on commentary about the health of the consumer (US retail sales surprised to the upside last week, offering some hope that the year has started well for big retailers) as well as inflation trends (whether retailers are raising prices by enough to match higher costs). JPM thinks that HD and WMT’s tone on guidance and the consumer will be cautious at best (the bank is neutral on WMT, and holds an overweight view for HD).

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


• 
  EUROPEAN DATA/SPEAKERS: The highlight on the data slate is the flash PMI data for February; the French composite and services PMIs both rose back into expansionary territory, though the manufacturing component slumped - it was expected to rise above the 50-mark; the survey compiler S&P Global said that at face value, France's flash PMI data were positive, showing the economy was in growth territory for the first time since October 2022. It was a similar showing for the German data, where the composite and services PMIs rose by more than expected, putting some sunlight between the index level and the 50-mark, but the manufacturing data slumped, though largely was a result of a substantial easing of supply-chain bottlenecks. Meanwhile, the Eurozone data entirely reflected the better tone of services and composite PMIs from Germany and France, while the manufacturing disappointed; S&P Global said the data was consistent with GDP rising at a quarterly rate of just under 0.3%. Elsewhere, for Germany, the ZEW survey for February will also be published. ECB President Lagarde will be speaking with Finnish TV channel Yle TV1 afterhours.


• 
  NORTH AMERICAN DATA/SPEAKERS: Flash PMI data for February and existing home sales are the data highlights. From Canada, headline inflation is expected to have cooled in January (detailed thoughts in our weekly here). President Biden begins his visit to Poland to mark the one year anniversary of Russia’s war on Ukraine (once again, we have some thoughts in our weekly here).


• 
  SUPPLY: UK will sell GBP 3.5bln of 2029 Gilts; Germany will sell EUR 5.0bln of 2028 Bobls; US will sell USD 42bln 2yr notes. (history here)


• 
  US CORPORATE EARNINGS: Today’s docket of corporate earnings includes: HD, MDT, WMT, PSA, PANW. Full expectations can be accessed here.


• 
  ENERGY: Note, weekly inventory data from the API will be released after the US close on Wednesday this week, rather than the usual Tuesday, on account of the Presidents Day Holiday on Monday. Elsewhere, WTI March 2023 futures will expire today.

STOCK SPECIFIC NEWS:

NOTE: Today’s US equity news recaps major stories for US corporates released after the Friday close, and through this morning.

FINANCIALS:

• 
  Earnings Outlook - Companies are beginning to get more confident in their profit outlooks, with fewer companies are now lowering their profit forecasts, Barron's reports. According to 22V Research, over the past three months, the share of S&P 500 companies that reduced their earnings guidance outstripped the portion that raised their calls by 25ppts - that compares with 35ppts for the three months through late 2022. The report said that now the earnings outlook appeared "less bleak."


• 
  HSBC (HSBC) - Q4 profits were boosted by higher interest rates, approves a second interim dividend. Q4 adj. pretax profits USD 6.8bln (exp. 6.4bln), Q4 revenue USD 15.4bln (exp. 14.5bln); FY reported PBT -1.4bln to USD 17.5bln, FY reported profit after tax +2.0bln to USD 16.7bln, FY adj. PBT +3.4bln to USD 24.0bln, FY revenue +4% to USD 51.7bln, FY NII USD 32.6bln (prev. 26.5bln Y/Y). The bank said revenue outlook remains positive, on track to deliver higher returns this year, optimistic about the global economy in H2. The bank is establishing a dividend payout ratio of 50% for 2023 and 2024, intends to revert to paying a quarterly dividend from Q1 2023. To restore dividends to pre-COVID levels ASAP. Will also consider a special dividend of USD 0.21/shr in early 2024 once sale of HSBC Canada is completed. Will bring forward the consideration of buy-backs to the announcement of Q1 2023 results. Is considering up to USD 300mln of additional costs for severance in 2023. Expects to complete the sale of Russian business in H1.


• 
  Visa (V), Mastercard (MA) - The global payment giants are facing the latest in a string of multibillion-pound competition lawsuits with the launch of a potentially vast class action claim on behalf of British companies, Sky News reports.


• 
  Affirm Holdings, Inc. (AFRM) - Affirm has persuaded many of its major retail partners — including the likes of Shopify and Dick’s — to let it increase interest rates on the loans it provides their customers, Bloomberg reports. Affirm is adjusting contracts that left it flat-footed as benchmark rates surged in the fight against inflation.


• 
  Auto Credit - A rising number of Americans are falling behind on their car payments, according to an analysis by Moody’s Analytics cited in the WSJ. Some 9.3% of auto loans extended to people with low credit scores were 30 or more days behind on payments at the end of last year, the highest share since 2010.


• 
  Discover Financial Services (DFS) - Credit card provider Discover will allow its network to track purchases at gun retailers come April, making it the first among its peers to publicly give a date for moving ahead with the initiative, which is aimed at helping authorities probe gun-related crimes, Reuters reports.

HEALTH CARE:

• 
  Abbott Laboratories (ABT) - Abbott said the DoJ is conducting a criminal investigation related to its manufacturing of infant formula. In December, officials requested information relating to Abbott's powder infant formula business and related public disclosures, and in January, Abbott received a civil investigative demand from the FTC seeking information in connection with its investigation of companies who participate in bids for Women, Infants, and Children infant formula contracts. Abbott also notes that multiple civil lawsuits have been filed against it over its manufacturing of certain powder infant formula products.


• 
  Teva Pharmaceutical Industries (TEVA) - FDA gave approval for Teva's AUSTEDO XR tablets.

TECH:

• 
  Tencent Holdings Limited (TCEHY), NetEase, Inc. (NTES), Baidu, Inc. (BIDU), DiDi Global Inc. (DIDIY) - China's Ministry of Industry and Information Technology Deputy head met Big Tech executives -- including Didi, Baidu, Tencent, Xiaomi, NetEase -- at an event hosted by the Internet Society of China, as Beijing eases its tech crackdown, SCMP reports. The report added that Didi's founder/CEO Cheng Wei made his first appearance at the annual event since China launched a cybersecurity probe into the firm in 2021.


• 
  International Business Machines Corporation (IBM) - In an FT interview, CEO said IBM was seeking ways to use AI to deliver labour-saving solutions to large enterprises.


• 
  Microsoft Corporation (MSFT) - Microsoft has begun talks with ad agencies on how it plans to make money from its revamped Bing search engine powered by generative artificial intelligence as the tech company seeks to battle Google's dominance, Reuters reports. In a meeting with a major ad agency, Microsoft showed off a demo of the new Bing and said it plans to allow paid links within responses to search results.


• 
  Salesforce Inc (CRM) - Salesforce and activist investor Elliott Management are in talks to reach an agreement that may end a possible board challenge, Reuters reports, adding that a settlement could potentially bring the two sides together, the sources said. But there is no indication on when an agreement might be reached or what it might look like.

COMMUNICATIONS:

• 
  Manchester United plc (MANU) - Elliott has ruled itself out of a full takeover of the world's most iconic football club Manchester United, but has offered to provide the financing for a GBP 5bln bid, The Times reports.


• 
  Meta Platforms, Inc. (META) - Meta CEO said it will launch a paid subscription service that allows Facebook and Instagram users to verify their accounts, FT reports. The Meta Verified service will let users get a blue badge, extra impersonation protection, and direct access to customer support. It will cost USD 11.99/month for web access, or USD 14.99/mpnth on Apple’s iOS operating system and on Android. It will be rolled out first in Australia and New Zealand this week.


• 
  Meta Platforms, Inc. (META) - Facebook Monday temporarily fought off a collective lawsuit in London valued at up to USD 3.7bln allegations the social media giant abused its dominant position to monetise users' personal data, Reuters reports. However, a London tribunal gave the proposed claimants' lawyers up to six months to "have another go" at establishing any alleged losses by users.


• 
  World Wrestling Entertainment, Inc. (WWE) - Controlling shareholder Vince McMahon seeks as much as USD 9bln in a potential sale of WWE, WSJ reports, adding that the company has already received offers.


• 
  China Reopening - China's film industry is making a strong comeback following the end of the country's zero-COVID policy, with box office sales hitting a record in January as moviegoers raced to see new blockbusters during Lunar New Year, Nikkei reports.

CONSUMER CYCLICAL:

• 
  Tesla, Inc. (TSLA) - Tesla is poised to unveil a cheaper USD 25k priced ‘Model 2’, as other manufacturers struggle to turn a profit from the electric vehicle revolution, The Times reports.


• 
  Tesla, Inc. (TSLA) - NHTSA asked Tesla for more information about one of its vehicles colliding with a fire truck in a fatal crash in the San Francisco Bay area, Bloomberg reports.


• 
  Amazon.com, Inc. (AMZN) - Amazon management has concluded that workers should return back to the office together the majority of the time, and at least three days per week, according to a blog post.


• 
  Apparel Names - A combination of supply chain chaos, higher costs and concerns about working conditions is forcing some western fashion brands to rethink their decades-old dependence on factories in China, FT reports.


• 
  Nike (NKE), Adidas (ADDYY) - Vietnamese supplier Pou Chen (9904 TT) reportedly cuts 6,000 jobs due to weak demand.


• 
  Travel & Leisure - the WSJ reports that hotels and booking sites say Americans will keep traveling in 2023, and travel companies have said leisure spending is continuing despite higher costs. The long-awaited rebound of business travel is also gaining steam, while the reopening of China could stoke demand further.


• 
  Harley-Davidson (HOG) - Raises quarterly dividend to 0.165/shr (from 0.1575/shr), payable March 20th.


• 
  European Car Registrations - The rate of EU27 new car registrations eased to 11.3% Y/Y in January from 12.8% Y/Y in December.


• 
  Swiss Watch Exports - Swiss watch exports picked up to +8.6% Y/Y in January, rising from the rate of +5.8% Y/Y in December.

CONSUMER STAPLES:

• 
  PepsiCo, Inc. (PEP), Starbucks Corporation (SBUX) - PepsiCo voluntarily recalled more than 25k cases of Starbucks chilled coffee drink after glass was found in some of the bottles, FDA said in a notice.


• 
  Walmart Inc. (WMT) - Positive mention in Barron's, which said that the stock was a buy, and may begin moving as it prepares to report its earnings, as the retailer is benefiting from a shift in how the US consumer is spending money.


• 
  Coca-Cola FEMSA (KOF), Heineken N.V. (HEINY) - Scotiabank analyst said FEMSA could use the EUR 1bln from its Heineken stake sale to finance dividends, invest into its growing digital financial services businesses, or even enable it to acquire a US convenience chain, Bloomberg reports.

INDUSTRIALS:

• 
  Lockheed Martin Corporation (LMT), General Dynamics Corporation (GD) - US General Christopher Cavoli has privately told lawmakers that F-16s, and other longer-range missiles could help Ukraine beat Russia, Politico reports. Elsewhere, GOP's House Foreign Affairs Committee Chair Michael McCaul said he was hopeful that the US will send more missiles and move to supply fighter jets to Kyiv as Russia’s war with Ukraine approaches its one-year mark.


• 
  Lockheed Martin Corporation (LMT) - Lockheed awarded a USD 1.12bln contract modification for missile production; the contract has options, which if exercised, would increase the value of the contract to USD 2.22bln.


• 
  Norfolk Southern Corporation (NSC) - Norfolk Southern drew USD 100mln on a credit line following a train derailment in Ohio earlier this month, according to a regulatory filing. It has USD 200mln of borrowing capacity remaining on the USD 400mln credit line.


• 
  Norfolk Southern Corporation (NSC), Railroad Companies - Senate Commerce Committee launches investigation into railroads’ handling of hazardous materials, after Norfolk Southern Corporation recent freight derailments in Ohio and Detroit, the former forcing a controlled burn of toxic chemicals and the evacuation of hundreds of residents. Senators on the Commerce Committee have sent letters to Norfolk Southern and six other major railroads requesting details about their safety practices, NYT reported.


• 
  Republic Services (RSG), Waste Connections (WCN), Waste Management (WM) - Barron's positively mentions the three, says these three vertically integrated solid-waste services are top of their industry after a multi decade process of consolidation, and were a buy.

MATERIALS:

• 
  BHP (BHP) - Profits fell and cuts dividend, but said there were demand green shoots in China. H1 attributable profit USD 6.5bln (vs 9.4bln Y/Y). H1 revenue from continuing operations USD 25.7bln (vs 30.5bln Y/Y). Lowers interim dividend 40% to USD 0.90/shr. Said wet weather in its coal assets impacted output and unit costs for H1, expects weather factors to abate, unit costs to fall in H2. The miner also said that improved end-use demand conditions were anticipated in China, but added that China’s demand for iron ore was expected to be lower than present levels, while China’s import policy remained a source of uncertainty; is positive about the demand outlook in H2 FY23 and into FY24. The miner confirmed to place two Queensland coking coal mines for sale.


• 
  Antofagasta (ANFGF) - Profits fell on higher costs and Chilean drought. FY22 revenue USD 5.86bln (prev. 7.47bln), FY EBITDA USD 2.93bln (prev. 4.84bln), FY pre-tax USD 2.56bln (prev. 3.48bln), FY EBIT margin 50.0% (prev. 64.7%). Copper production -10.4% Y/Y. The miner affirmed FY23 copper production guidance at 670-710kt, and CapEx around USD 1.9bln.


• 
  Sigma Lithium Corporation (SGML), Tesla, Inc. (TSLA) - Tesla has been mulling a takeover of battery-metals miner Sigma Lithium amid rampant demand for the metal used in electric vehicle batteries, Bloomberg repos. Tesla has been speaking with potential advisers about a bid, and the report adds that Sigma Lithium is one of multiple mining options Tesla is exploring as it weighs its own refining.


• 
  Berry Global Group (BERY), Celanese (CE), Dow (DOW), LyondellBasell Industries (LYB), Origin Materials (ORGN) - Mentioned positively in Barron's, which said these five names were the stocks to play the future of plastic.

21 Feb 2023 - 09:31- Research Sheet- Source: Newsquawk