US EARLY MORNING: US equity futures are trading a touch above flat ahead of today's CPI report

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  EQUITIES: APAC equities were mostly positive as the region took impetus from the gains on Wall Street. European equities opened with gains. US equity futures are currently trading with modest gains. CPI data is due today, but is unlikely to be a game changer for Wednesday's FOMC, though will help shape expectations for next year's policy trajectory (see our preview, below).


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  TREASURIES: Yields are lower across the curve by 4-5bps, with the curve modestly bull flattening. Monday's sale of 3s and 10s were both soft, and a sale of 30s comes later today (post-CPI data). In Europe, EGBs are rallying. Gilt yields are lower by 11bps after soft UK wages data sees traders bet on BoE rate cuts next year.


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  FOREX: The Dollar Index has been drifting lower ahead of today's CPI report. The Chinese CNY is steady, with traders focussed on the CEWC conference, where top policymakers will discuss economic targets for next year, and will talk about stimulus plans. The JPY is gaining vs the buck, while activity currencies are also generally seeing some limited upside.


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  COMMODITIES: Oil is seeing some upside, but analysts still caution about soft demand conditions likely next year, as well as the potential for an oversupplied market. The EIA will publish its STEO today, while the API will report weekly inventories after the close (expectations: Crude -1.5mln, distillate +1.2mln, gasoline +2.4mln).

TODAY’S AGENDA:

• Our full interactive calendar is here; a PDF version can be downloaded here.


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  DAY AHEAD: The European morning is thin, with the German ZEW survey for December the only notable release item. The focus of the US Day is the CPI report for November, where the headline rate of annual inflation is seen paring back a touch, while the core rate is expected to be unchanged (our primer is below). Additionally, the NFIB survey and the weekly RedBook is out in the premarket. In the afternoon, Federal Budget data for November is out. On the energy front, the EIA’s Short Term Energy Outlook is due to be published in the afternoon, and afterhours, the API will report its weekly inventory data ahead of Wednesday’s more widely followed DoE report. US supply comes by way of a 30yr bond auction. On the earnings docket, JCI will report today (estimates here).


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  PREVIEW - US CPI (13:30GMT/08:30EST): The annual rate of headline CPI is expected to ease, core is seen unchanged. Consensus expects US headline CPI to be unchanged M/M in November (matching the prior rate), while the annual rate of headline inflation is expected to ease to 3.0% Y/Y from the 3.1% in October. November's Core CPI is seen rising +0.3% M/M, a little quicker than the +0.2% registered in October, while the annual rate of core inflation is seen unchanged at 4.0% Y/Y. Goldman Sachs expects used car prices to decline 0.9%, new car prices to decline by 0.3%, which the bank says reflects rebounding promotional incentives and declining used car auction prices in the month. Airfares are seen rising 4% in the month, which GS says reflects a seasonally adjusted rise in its real-time measure of airfares ahead of the holidays. GS also expects shelter inflation to run at a similar pace to last month’s (it sees +0.5%, and owner-equivalent rents to rise +0.4%), as the gap between rents for new and continuing leases continues to close and the OER-rent gap normalises after last month’s decline. The data comes a day ahead of the FOMC policy announcement (unchanged expected), and while it is unlikely to shift the dial for December, it may help shape expectations about future Fed policy easing, with market expectations looking for 115bps of rate cuts in 2024 (four fully priced 25bps rate cuts, with a decent chance of a fifth). Fed Chair Powell recently reminded us that inflation was still well above target, though acknowledged it was moving in the right direction, with inflation coming down meaningfully of late. Still, the Fed Chair said he wants to see more progress, and retained optionality for resuming rate hikes if the situation demanded. JPMorgan says that unless we see November CPI print above 4%, the Fed is done with its ate hike cycle, absent any exogenous shocks. The bank notes that within last week's jobs data, the increase in labour force participation was a positive; "Fed data shows an increase in foreign-born workers driving this," and "historically, those workers have skewed to lower income jobs which, over time, should temper wage inflation" ahead. Meanwhile, if the headline printed under 3%, then JPM thinks yields will continue to decline and stocks will take another leg higher. "Some investors are using the EU inflation situation as a proxy for the US," JPM writes, "EU inflation peaked at 10.6% in October 2022 and the current level is 2.4%, while the US peaked at 9.1% in June 2022, and its current level is 3.2%." Looking ahead, Goldman Sachs expects monthly core CPI inflation to remain around 0.3% in the next three months. "We see further disinflation in the pipeline in 2024 from rebalancing in the auto, housing rental, and labour markets," GS writes, "though we expect a small offset from a delayed acceleration in healthcare." It sees core CPI at 2.7% by the end of next year.


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  REVIEW - UK JOBS DATA: The UK claimant count rose 16.0k in November (exp. 15.0k, prev. 8.9k), while 12k were shed from the HMRC payrolls in the month (prev. +33k). The ILO unemployment rate was unchanged at 4.2% in October, in line with expectations. UK average weekly earnings rose by a rate of 7.2% 3m/YY in October (exp. +7.7%, prev. +8.0%), while the ex-bonus measure rose 7.3% (exp. 7.4%, prev. 7.8%). Capital Economics said "the sharp fall in wage growth in October will probably further fuel investors’ expectations that interest rates could be cut as soon as the middle of next year, and leaves our forecast for rate cuts to start late in 2024 looking a bit more challenging." However, its economists note that low response rates again meant that the ONS published experimental data rather than the full Labour Force Survey data. It notes that one of the BoE key barometers of inflation persistence (regular private sector pay growth) eased to 7.3% from 7.9%, leaving it on track to fall to 7.2% by December, as the MPC forecast in November. "Labour demand was stronger than we had expected," it writes, "but other indicators point to cooling in labour demand ahead."

EQUITY NEWS:

TECH:

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  Broadcom (AVGO) - Caltech and Broadcom join forces in a multi-year partnership, establishing the Broadcom Quantum Laboratory at Caltech. The collaboration aims to advance quantum science research, explore innovative technologies, and facilitate joint programming and annual symposiums for scientific development.


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  CATL (300750 KS) - The Chinese battery manufacturer is strategically extending its electric vehicle battery technology to include air and sea transport, Digitimes reports.


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  Memory Prices - Memory prices have shown a robust upward trend since bottoming out in the second quarter of 2023, Digitimes reports, while November saw NAND flash prices rebound to early 2023 levels, DRAM and NAND prices still face challenges in returning to break-even points.


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  Microsoft (MSFT) - Chief HR officer Kathleen Hogan sold 24,681 shares on December 8th at USD 369/shr.


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  Nokia (NOK) - The telecoms equipment maker cuts its FY26 comparable operating margin guidance, sees at least 13% (prev. saw 14%); other targets remain unchanged. Separately, Deutsche Telekom (DTEGY) and Nokia will begin deployment of multi-vendor Open RAN network in Germany.


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  Nvidia (NVDA) - The Biden administration is in talks with Nvidia about permissible sales of AI chips to China, but emphasised that it cannot sell its most advanced semiconductors to Chinese firms, Reuters reports. Commerce Secretary Gina Raimondo said Nvidia "can, will and should sell AI chips to China because most AI chips will be for commercial applications."


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  Oracle (ORCL) - Shares of the software company skidded by 8.8% in afterhours trading as sales missed consensus expectations. Q2 adj. EPS 1.34 (exp. 1.32), Q2 revenue USD 12.90bln (exp. 13.05bln). Q2 cloud revenue USD 4.8bln (exp. 4.86bln), cloud Infrastructure revenue USD 1.6bln (exp. 1.55bln), cloud Application revenue USD 3.2bln (exp. 3.15bln), cloud services and license support revenue USD 9.64bln (exp. 9.69bln), service revenue USD 1.37bln (exp. 1.41bln), adj. operating margin 43% (exp. 42.6%). Exec noted that it did not bring up as much capacity as it could have used in the quarter. Sees Q3 adj. net income between 1.35-1.39 per share (exp. 1.37), and sees revenue growth of between 6-8% (exp. +7.6%).


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  SAIC (SAIC) - SAIC will restructure its business in February, replacing current sectors with five new groups to accelerate growth, focusing on innovation and customer relations. Senior VPs will lead four groups; an external search is on for the Civilian group leader.


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  Semiconductors - US Commerce Secretary Raimondo expects to make around a dozen semiconductor chips funding awards within the next year, including multi-billion dollar announcements that could drastically reshape US chip production, Reuters reports. The news follows Monday's announcement of its first award - USD 35mln funding for a BAE Systems (BAESY) facility in Hampshire to produce chips for fighter planes.


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  TSMC (TSM) - TSMC is nearing finalisation of its 3nm and 2nm client base, Digitimes reports. Customers for TSMC's 3nm and 2nm processes are unlikely to shift orders due to the increased difficulty of process technology and TSMC's one-stop service that includes backend advanced packaging, the tech blog reported.

COMMUNICATIONS:

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  AMC Entertainment (AMC) - AMC completed its USD 350mln equity offering, and has subsequently reduced its liabilities by USD 62.3mln by repurchasing/exchanging debt, and strengthening its balance sheet as part of ongoing efforts.


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  Rogers Communications (RCI) - Sells shares of Cogeco for CAD 829mln in private transaction, as it strengthens its balance sheet and reduces debt. Exec said it was tracking six months ahead in its deleveraging plans, and its committed to reducing debt leverage even further.

CONSUMER:

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  British American Tobacco (BTI) - Billionaire Kenneth Dart's Spring Mountain Investments has increased its position in British American Tobacco to 10% (prev. 9%) following the recent share sell-off, The Times reports.


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  Casey's General Stores (CASY) - Q2 EPS 4.24 (exp. 3.80), Q2 revenue USD 4.06bln (exp. 4.06bln), Q2 inside SSS +2.9% Y/Y. Sees FY24 adj. EBITDA growth within target parameters.


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  Ford Motor (F) - Ford halves planned production of the electric F-150 Lightning due to shifting market demand, aiming for 1,600 units per week, down from the initial target of 3,200 units, aligning with current customer demand trends amid an industrywide EV investment slowdown, according to Automotive News.


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  Grocery Outlet (GO) - CFO Charles Bracher to step down in March. GO has initiated a search for a new CFO. Grocery Outlet reiterates FY23 adj. EPS outlook between USD 1.04-1.06 (exp. 1.05), and its FY23 revenue view at USD 3.95bln (exp. 3.96bln).


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  Hasbro (HAS) - The toymaker will cut nearly 20% of workforce amid sluggish sales, WSJ reports, as weak sales for toys and games persist even amid the holiday shopping period. HAS to cut around 1,100 jobs in addition to the 800 cuts announced earlier this year. Hasbro confirmed the reporting, and said it would eliminate an additional 900 positions starting in Q4. Shares fell 5.5% in extended trading after it filed its 8K.


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  Lucid Group (LCID) - CFO Sherry House is resigning from her position, effective immediately, to pursue other opportunities. House will be available in an advisory role through December 31st to assist in the transition. Gagan Dhingra, Lucid's current Vice President of Accounting and Principal Accounting Officer, will additionally serve as interim Chief Financial Officer and Principal Financial Officer, effective immediately, while Lucid's search for a replacement CFO.


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  Puma (PUMSY) - The apparel maker is to end its sponsorship of Israel's national football team, FT reports, and its to announce two new sponsorship teams next year.


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  The Gap (GPS) - Chief legal and compliance officer Julie Gruber sold 24,178 shares on December 7th at USD 21.50/shr.


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  TJX (TJC) - TJX president and CEO Ernie Herrman sold 17k shares on December 7th at USD 89.0627/shr.


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  TriMas (TRS) - Activist Barington Capital calls on TriMas to prioritise its packaging business and sell non-core assets, emphasising the need to divest the aerospace unit by 2025 due to competitive disadvantages, Bloomberg reports. Barington also wants divestment or restructuring for other specialty product businesses like Arrow Engine and Norris Cylinder.


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  Volkswagen (VWAGY), Honda (HMC), Hyundai (HYMTF) - Workers organising with the UAW at Honda in Indiana, Hyundai in Alabama, Volkswagen in Tennessee file charges against management.

HEALTHCARE:

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  AstraZeneca (AZN), Icosavax (ICVX) - AZN will acquire Icosavax, including potential first-in-class RSV and hMPV combination vaccine with positive Phase II data. Will be acquired at a price of USD 15/shr, alongside 5/shr milestones, for a combined consideration of USD 1.1bln.


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  Bristol Myers Squibb (BMY) - SystImmune and Bristol Myers Squibb partnered to develop and commercialise BL-B01D1, a promising bispecific antibody-drug conjugate targeting EGFR and HER3 for cancer treatment. SystImmune will oversee China operations while Bristol Myers Squibb manages global development and commercialisation.


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  Bristol Myers Squibb (BMY), 2seventy Bio (TSVT) - Bristol Myers and 2seventy bio released results from the Phase 3 KarMMa-3 study at ASH, showing Abecma's significant advantage over standard regimens in treating heavily pre-treated triple-class exposed relapsed/refractory multiple myeloma, with improved progression-free survival and higher response rates.


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  Eli Lilly (LLY) - Eli Lilly's updated data on pirtobrutinib from the Phase 1/2 BRUIN trial, presented at ASH, reinforces its effectiveness in treating CLL, SLL, and MCL, highlighting its potential role as an FDA-approved non-covalent BTK inhibitor for various B-cell malignancies.


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  Gilead (GILD) - Gilead's Kite unit presented data at ASH supporting Tecartus' efficacy in relapsed/refractory mantle cell lymphoma and adult B-cell precursor acute lymphoblastic leukemia.


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  Pfizer (PFE) - Pfizer's BLA for marstacimab, a potential treatment for hemophilia A or B without inhibitors, has been accepted by the FDA and is under review by the European Medicines Agency.


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  ResMed (RMD) - ResMed won vs NYU's patent claims after the PTAB invalidated seven NYU patents in a case over ResMed's products. The PTAB agreed with ResMed, ruling all challenged claims across the seven patents as invalid.


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  Roche (RHBBY) - A Nature Medicine study validates Predicine BEACON MRD Liquid Bopsy assay in Genetech's Phase 1b clinal trial of divarasib plus cetuximab in CRC.


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  Sanofi (SNY) - Sanofi said it was disappointed over the FTC's injunction on its licensing deal with Maze Therapeutics for a Pompe Disease treatment. Despite the disagreement, Sanofi has terminated the agreement due to litigation delay, prioritising patient interests while remaining committed to addressing Pompe's unmet needs.

FINANCIALS:

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  Coinbase (COIN) - Director Frederick Ehrsam sold 97.8K shares on December 7th for a total USD 13.3mln.


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  Discover Financial Services (DFS) - Discover has appointed Michael G. Rhodes as Chief Executive Officer and President, effective on or before March 6th. Will also serve as President of Discover Bank.


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  Euronext (ERNXY), Deutsche Boerse (DBOEY) - Euronext CEO said Deutsche Boerse CEO approached him around 18 months ago regarding the creation of a "new tech exchange" within Europe, similar to the Nasdaq; Euronext rejected the proposal, according to the FT.


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  Franklin Resources (BEN) - November preliminary AUM USD 1.41tln (prev. 1.33tln M/M); the increase reflected the impact of positive markets and flat long-term net outflows.


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  Invesco (IVZ) - November preliminary AUM USD 1.54tln (+6.3% M/M); AUM positively impacted by favourable market returns.


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  JPMorgan (JPM) - JPM is set to outsource it local custody business in Hong Kong and Taiwan, while Citigroup (C), HSBC (HSBC), and Standard Chartered (SCBFY) are in talks with JPM for local custody mandate in Hong Kong and Taiwan, according to Reuters.


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  KKR & Co. (KKR) - Veritas Capital (private) to sell a 50% stake in Cotiviti (private) to KKR, valuing it at up to USD 11bln, FT reports. The deal could return billions to Veritas after a previous failed attempt. Veritas plans to sell from its original investments and buy back half through a newer fund, which would leave Cotiviti roughly half owned by KKR and half owned by Veritas.


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  Prudential (PRU) - The Insurer authorised a share buyback for up to USD 1.0bln.

INDUSTRIALS:

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  Aramark (ARMK) - Chief Financial Officer Tom Ondrof plans to retire in January, will serve as a Strategic Advisor through May. Senior Vice President Finance & Treasurer Jim Tarangelo appointed to succeed Ondrof as CFO.


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  Pentair (PNR) - Pentair raised quarterly dividend to 0.23/shr (prev. 0.22/shr).


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  Waste Management (WM) - Raises dividend +7% to 0.75/shr, and announced a USD 1.5bln share buyback plan superseding the authority remaining under the prior USD 1.5bln authorisation announced in 2022.

ENERGY:

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  FirstEnergy Corp. (FE) - Carl Icahn reduced holdings in FirstEnergy Corp. to below 1.5% (vs 2.5% in September 2021), forfeiting board seats amid a corruption scandal where Andrew Teno, a portfolio manager at Icahn's investment firm, resigned on Friday.

12 Dec 2023 - 09:30- Research Sheet- Source: Newsquawk