US EARLY MORNING: US equity futures are slightly lower, conforming with a cautious global risk backdrop; heavy slate of Fedspeak ahead

US PRE-MARKETS: US equity futures are trading with small losses ahead of a heavy slate of Fedspeak, which includes FOMC Vice Chair Williams, Fed’s Vice Chair of supervision Barr, Fed Governor Waller, as well as Fed 2023 voter Logan and 2025 voter Schmid. Overnight, the RBA hiked its Cash Rate by 25bps, as expected, with forward guidance seeing a dovish tweak, while China trade data was mixed (imports posted surprise growth, but exports fell more than expected). In Europe, there has been another set of soft industrial data out of Germany. European stocks opened cautiously, in keeping with the subdued global risk appetite. Treasury yields are lower across the curve, taking its cue from risk dynamics rather than the upsized supply to be auctioned this week. The Dollar Index rises, as risk currencies snap their recent run of gains amid the caution. Oil futures are lower, taking their cues from China trade data rather than supply dynamics. In addition to the heavy dose of Fedspeak today, markets will note the US trade data for September, IBD/TIPP economic optimism survey for October, the Manheim used vehicles price index, and the NY Fed’s Q3 household wealth report. Elsewhere, the EIA’s STEO is due in the US afternoon, while the weekly inventory data from the API will be released after the US close.

EQUITIES' UNATTRACTIVE RISK-REWARD: JPM's Global Markets Strategist Marko Kolanovic notes that falling bond yields and the dovish central bank meetings are being interpreted by equity markets as a positive in the near term, but JPM believes "that equities will soon revert back to an unattractive risk-reward as the Fed is set to remain higher for longer, valuations are rich, earnings expectations remain too optimistic, pricing power is waning, profit margins are at risk and the slowdown in topline growth is set to continue." Kolanovic says that the ‘bad news is good news’ play may be quite narrow, as it is difficult to distinguish between a healthy slowdown and the initial stages of recession without the benefit of hindsight. "With the market now pricing in a full ease by mid-2024, valuations rich and the increase in supply, we turn tactically short on 7Y USTs, after taking profit on longs in 5Y USTs, and look for a steeper curve at the long end." He says US HG spreads should stay range-bound as yields decline, but ratings trend up, while US HY default activity increased in October. On currencies, JPM says US developments have opened a window for USD weakness, "but dollar bears would be well-served to ask for how long; US exceptionalism still lingers, with the rest of the world on more tenuous footing." and on energy, JPM says that oil prices have remained relatively subdued despite geopolitical escalation in the Middle East, "however, the conflict is not yet resolved and geopolitical risk is skewed to the upside," adding that geopolitical risk premium can also linger for European natgas because of weather conditions.

EQUITY NEWS:

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  Airbnb (ABNB) - Italy is seizing EUR 779mln from Airbnb due to alleged unpaid taxes. Airbnb is accused of not paying 21% withholding taxes on EUR 3.7bln of rental income, Bloomberg said. Three former employees are being investigated. Airbnb said it has been in talks with the Italian tax agency since June.


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  Alphabet (GOOG) - YouTube is testing AI features for comment sections, and is trying to organise long video comments into topics for easier discussions.


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  Aspen Technology (AZPN) - Q1 EPS 1.16 (exp. 1.56), Q1 revenue USD 249.31mln (exp. 264.8mln), Q1 ACV +10.9%. Now sees FY24 EPS at 6.57 (prev. saw 6.51)


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  Baidu (BIDU), Nvidia (NVDA) - Baidu placed an AI chip order with Huawei, in a move away from Nvidia, as the US tightens tech export restrictions for China, Reuters reports.


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  Celanese (CE) - Q3 EPS 2.50 (exp. 2.23), Q3 revenue USD 2.72bln (exp. 2.77bln). Announced new Executive team appointments: Scott Richardson named Executive Vice President and Chief Operating Officer. Chuck Kyrish named Senior Vice President and Chief Financial Officer. Sees Q4 EPS between 2.10-2.50 (exp. 2.68). Sees FY23 EPS at the lower end of its previously announced guidance range (of USD 9.00-10.00) (exp 9.26).


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  Citigroup (C) - Citibank China issued a statement refuting recent false reports and misleading statements circulating on social media platforms regarding Citibank's exit from the Chinese market, China's Global Times newspaper reported. Citi said the reports contained exaggerations and were not accurate, emphasising that it is strategically adjusting its consumer banking operations globally, including the gradual discontinuation of its consumer banking business in the Chinese mainland.


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  Coherent (COHR) - Q1 EPS 0.16 (exp. 0.12), Q1 revenue USD 1.05bln (exp. 1.05bln). Exec said macro uncertainty continued to negatively impact near-term visibility. Q2 EPS seen between 0.14-0.32 (exp. 0.22), and Q2 revenue is seen between USD 1.08-1.18bln (exp. 1.1bln). FY24 revenue seen between USD 4.5-4.7bln (exp. 4.6bln).


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  Diamondback Energy (FANG) - Q3 EPS 5.49 (exp. 4.92), Q3 revenue USD 2.34bln (exp. 2.14bln); Q3 average production 266.1 MBO/d or 452.8 MBOE/d.


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  Fabrinet (FN) - Q1 adj. EPS 2.00 (exp. 1.86), Q1 revenue USD 685.5Mmln (exp. 659mln). Exec said industry-wide inventory adjustments continue to affect certain programmes. Sees Q2 adj. EPS between 1.98-2.05 (exp. 1.95), and sees Q2 revenue between USD 680-700mln (exp. 682.2mln).


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  Gilead (GILD) - Gilead and Arcus Biosciences reported positive results from the EDGE-Gastric study; a combination of two antibodies and chemotherapy showed promising responses in treating advanced stomach and esophageal cancers.


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  Goodyear Tire (GT) - Q3 EPS 0.36 (exp. 0.19), Q3 revenue USD 5.14bln (exp. 5.3bln). Q3 tire unit volume -2.8% Y/Y at 45.3mln units.


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  Intel (INTC) - Intel is a top contender for receiving government funding to build secure microchip facilities for the US military and intelligence, WSJ reports. These "secure enclaves" aim to reduce reliance on chips from East Asia, like Taiwan, which could be at risk from Chinese threats, the report added.


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  International Flavors & Fragrances (IFF) - Q3 adj. EPS 0.89 (exp. 0.75), Q3 revenue USD 2.82bln (exp. 2.77bln). FCF USD 405mln (exp. 461mln). Maintains revenue outlook for the FY, but now sees EBITDA at the mid-to-high-end of the prior guidance range. Announces continuation of co-operation with Icahn Capital, has agreed to renominate one Icahn director and mutually agreed director to IFF board in 2024.


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  Kinder Morgan (KMI), NextEra Energy Partners (NEP) - Kinder Morgan is to acquire NextEra Energy Partners' South Texas gas pipelines for USD 1.82bln, Reuters reports; the pipelines transport natgas to Mexico and South Texas, and have a total capacity of 4.9bcf per day. The deal comes as the oil and gas pipeline industry consolidates due to growing US production and permit challenges.


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  Lucid (LCID), Tesla (TSLA) - Lucid will adopt North American Charging Standards (NACS), and the automaker will be able to access 15k+ Tesla superchargers in North America in 2025.


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  Manchester United (MANU) - A top shareholder Nick Train said he was in the dark over the future of the Premier League football club, as the Glazer family continued talks with Jim Ratcliffe over potential investment, FT reports. Train said discussions over a deal had been an “extraordinarily convoluted and lengthy process”, almost one year since the Glazers said they would consider new investment into the club, a sale, or other transactions.


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  Novo Nordisk (NVO) - Novo Nordisk initiates a new share buyback programme of up to DKK 4.1bln.


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  NXP Semiconductors (NXPI) - Q3 adj. EPS 3.70 (exp. 3.59), Q3 revenue USD 3.43bln (exp. 3.4bln), Q3 GM 58.5% (exp. 58.3%). Sees Q4 adj. EPS between 3.44-3.86 (exp. 3.61), and sees Q4 revenue between USD 3.30-3.50bln (exp. 3.42bln).


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  Realty Income (O) - Q3 adj. FFO 1.02 (exp. 1.00), Q3 revenue USD 1.04bln (exp. 1.bln), Q3 occupancy 98.8% (exp. 98.8%). Narrows its FY23 AFFO outlook to between USD 3.98-4.01 (exp. 4.01, prev. guided 3.96-4.01).


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  RingCentral (RNG) - Q3 adj. EPS 0.78 (exp. 0.75), Q3 revenue USD 558mln (exp. 554.2mln). Sees Q4 adj. EPS between 0.82-0.83 (exp. 0.82), and sees Q4 revenue between USD 566.5-573.5mln (exp. 571mln). Narrows FY23 EPS outlook to between USD 3.19-3.20 (exp. 3.15) from 3.11-3.25, and narrows its FY23 revenue outlook to between USD 2.198-2.205bln (exp. 2.2bln) from USD 2.19-2.21bln.


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  Space Stocks - SpaceX is set to make around USD 9bln billion in revenue this year from rocket launches and Starlink, with expectations of reaching USD 15bln in 2024, BBG reports. Starlink's sales are anticipated to surpass rocket launches as it expands globally. SpaceX was valued at approximately USD 150bln in a recent tender offer.


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  Splunk (SPLK) - Splunk files to sell 12.8mln shares of common stock.


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  Stellantis (STLA) - Unifor auto workers at Stellantis approved the Master Collective Agreement, which includes several plants and various work units.


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  Tesla (TSLA) - Tesla is increasing the prices of its Model Y electric cars in China, BBG reports. The timing for the price hikes hasn't been decided yet. Tesla initially lowered prices in China, sparking a price war in the electric vehicle market, but has recently raised them as well, BBG notes.


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  TomTom (TMOAY), Microsoft (MSFT) - TomTom’s road analytics products are now available within Microsoft Azure marketplace.


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  TripAdvisor (TRIP) - Q3 EPS 0.52 (exp. 0.46), Q3 revenue USD 533mln (exp. 505mln). EBITDA 127mln (exp. 112.4mln); Q3 core revenue +2%, Viator sales +41%, TheFork +20%.


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  UBS (UBS) - The Swiss bank reported Q3 revenue of USD 11.7bln (exp. 11.04bln), Q3 net loss of USD 785mln (exp. -444mln). It said it saw positive net new money in CS Wealth Management for the first time since Q1 2022. Wealth Management pretax income USD 1.01bln (exp. 1.24bln), underlying CET1 14.4% (prev. 14.1% Y/Y), net new money of USD 22bn in Global Wealth Management.


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  Vertex Pharmaceuticals (VRTX) - Q3 adj. EPS 4.08 (exp. 3.97), Q3 revenue USD 2.48bln (exp. 2.5bln). Raises its FY23 product revenue outlook to about USD 9.85bln (vs previous guidance for between USD 9.7-9.8bln). Still sees Phase 3 data for VX-548 by the end of the year.

07 Nov 2023 - 09:30- Research Sheet- Source: Newsquawk