US EARLY MORNING: US equity futures are trading with slight gains; China fell into deflation in July; quiet docket ahead before Thursday's US CPI data

US PRE-MARKETS: US equity futures are trading with modest gains, Treasury yields are mixed, the Dollar Index is a little beneath neutral, while crude futures are trading slightly in the green despite a larger than expected build reported by the API - the more widely followed DoE data will be released later. Overnight the focus was on China's inflation data which showed the nation fell into deflation in July, and continues the tone of soft economic releases out of the world's second largest economy, and that is leading to growing expectations of further government support ahead (see our analysis, below). The data slate for Wednesday is quiet, and that may allow traders to begin focussing on the US inflation data that is due on Thursday. There is also 10yr supply from Germany, the UK as well as the US today - the upsized sale of 3yr notes on Tuesday was well-received at these higher yield levels.

CHINA INFLATION: China consumer prices fell at a rate of -0.3% Y/Y in July (exp. -0.4%, prev. 0.0%), slipping into deflation for the first time since February 2021. CPI came in at +0.2% M/M (exp. -0.1%, prev. -0.2%), largely led by a 26% Y/Y decline in pork prices in July. Core CPI rose +0.8% Y/Y (prev. 0.4%), while PPI printed -4.4% Y/Y (exp. -4.1%, prev. -5.4%). The data underscores weak domestic demand with the expected post-COVID rebound in consumer spending failing to materialise. analysts have suggested that the data further fuels calls for more government support measures, particularly given the weaker trade data earlier this week, and further tensions within the property sector. Some have touted possible rate and RRR cuts later this year. (See full analysis here)

TODAY’S AGENDA:

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


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  EUROPEAN DAY: The ECB will continue to release snippets from its Economic Bulletin, with today’s publication focussing on the implications of a low-carbon transition. On the supply front, the UK will sell GBP 3.5bln of 2033 Gilts, while Germany will sell EUR 5bln of 2033 Bunds. EMFX traders will note the release of the NBH's July meeting minutes.


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  NORTH AMERICA DAY: Weekly MBA mortgage applications data and Canadian building permits are the data highlights on a thin calendar. The Treasury will auction USD 38bln of 10yr notes following a well-received sale of upsized 3yr notes on Tuesday. On the corporate earnings front, the docket is highlighted by Disney (DIS), which reports afterhours; our full Daily US Earnings Estimates can be accessed here.


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  ENERGY: The DoE will release weekly energy inventories; the API data released afterhours Tuesday reportedly showed Crude +4.1mln (exp. +0.6mln), Gasoline -0.4mln (exp. flat), Distillates -2.1mln (exp. flat), Cushing -0.1mln.

EQUITY NEWS:

TECH:

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  SoftBank (SFTBY), Amazon (AMZN) - Amazon is considering investing in SoftBank's Arm unit before its IPO, Reuters reports. Arm aims to raise USD 8-10bln in a September Nasdaq listing. It is in talks with tech firms too, Reuters said. These investors will not get control of the chipmaker, but Arm hopes their involvement will attract more customers and make the IPO more appealing.


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  Akamai Technologies (AKAM) - Stock rallied 4% afterhours following sales, earnings beats, raised guidance. Q2 adj. EPS 1.49 (exp. 1.41), Q2 revenue USD 0.94bln (exp. 0.93bln). Sees Q3 adj. EPS between USD 1.48-1.52 (exp. 1.41), and sees Q3 revenue between USD 937mln-952mln (exp. 931.7mln). FY adj. EPS forecast raised to between USD 5.87-5.95 from 5.69-5.84 (exp. 5.75), and FY sales forecast raised to USD 3.77-3.80bln from (exp. 3.76bln, prev. 3.74-3.79bln).


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  FleetCor Technologies (FLT) - Q2 EPS 4.19 (exp. 4.17), Q2 revenue USD 948.2mln (exp. 945.4mln). Announced USD 2B interest rate swaps with an average term of 3.5yrs, and average fixed rate of 4.30%, to help reduce the variability of interest payments on its floating rate debt. Sees Q3 EPS between 4.44-4.64 (exp. 4.57), and sees Q3 revenue between USD 0.98-1bln (exp. 993mln). Sees FY23 adj. EPS between 17.09-17.35 (exp. 17.11), and sees FY23 revenue between USD 3.84-3.86bln (exp. 3.8bln)


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  Lyft (LYFT) - Q2 adj. EPS 0.16 (exp. -0.01), Q2 revenue USD 1.02bln (exp. 1.02bln); Q2 active riders 21.5mln (exp. 21.1mln), Q2 revenue per active rider USD 47.51 (exp. 48.52). Q3 revenue seen between USD 1.13-1.15bln (exp. 1.08bln), and Q3 adj. EBITDA between USD 75-85mln (exp. 47.2mln). Sees Q4 revenue growth in low-to-mid single digits Q/Q, and sees Q4 adj. EBITDA margin in-line to slightly lower than Q2.


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  Super Micro Computer (SMCI) - Fell 9.3% afterhours. Q4 adj. EPS 3.51 (exp. 2.96), Q4 revenue USD 2.18bln (exp. 2.1bln). Sees Q1 adj. EPS between 2.75-3.50 (exp. 2.96), and sees Q1 revenue USD 1.9-2.2bln (exp. 2.03bln); sees FY24 revenue between USD 9.5-10.5bln (exp. 8.42bln). MarketWatch said the stock's drop may be related to the fact that it has rallied more than 300% YTD, and the guidance may be disappointing in the context of the recent AI buzz.


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  Sony (SONY) - Q1 pretax profits JPY 276.03bln (-21% Y/Y), Operating Profit JPY 253.04bln (-30.6% Y/Y). Sees FY Net at JPY 860bln (exp. 897.74bln, previously saw 840bln).


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  Toast (TOST) - Rallied 12.7% afterhours. Q2 EPS -0.19 (exp. -0.14), Q2 revenue USD 978mln (exp. 942mln). Q2 ARR +45% Y/Y, Q2 GPV +38% Y/Y, total locations +35% Y/Y. Q3 sales seen between USD 1.01-1.04bln (exp. 1.0bln); lifts FY23 revenue outlook to between USD 3.81-3.87bln (exp. 3.8bln, prev. 3.71-3.80bln).

COMMUNICATIONS:

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  Take-Two (TTWO) - Q2 EPS -1.22 (exp. 0.42), Q2 revenue USD 1.28bln (exp. 1.21bln). Sees FY EPS at loss between USD 2.95-3.20 (exp. 3.52 profit), and sees FY revenue between USD 5.37bln-5.47bln (exp. 5.56bln). Although TTWO earnings missed estimates, investors were focussed on the fiscal year 2025 (when the company sees a "significant inflection point") and beyond; with many speculating that the Grand Theft Auto VI game may be released soon. CEO alluded to a "powerful" release schedule outlook, adding that the company does not talk about individual titles, preferring to leave announcements to its subsidiary publishing labels, but it remains highly confident in the release outlook.


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  Twilio (TWLO) - Rose 6% afterhours. Q2 EPS 0.54 (exp. 0.30), Q2 revenue USD 1.04bln (exp. 0.99bln). Reported more than 304k Active Customer Accounts (vs 275k Y/Y). Exec said it saw continued stabilisation of volumes. Sees Q3 sales of 0.9855bln (exp. 1.018bln), and Q3 EPS of 0.33-0.37 (exp. 0.30); raises FY operating income view.


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  Bumble (BMBL) - Fell 4% afterhours with investors apparently not enthused by in-line guidance. Q2 EPS 0.05 (exp. 0.03), Q2 revenue USD 259.7mln (exp. 256.6mln). Exec said that in addition to attracting a record number of paying users on Bumble, it launched BFF as a standalone offering, further stabilised Badoo, expanded portfolio of apps. Sees Q3 revenue between USD 274-280mln (exp. 275.6mln); sees FY23 revenue between USD 1.055-1.072bln (exp. 1.06bln).


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  Endeavor Group (EDR) - Rose 2.4% afterhours. Q2 EPS 1.29 (exp. 0.30), Q2 revenue USD 1.44bln (exp. 1.41bln). Exec said it is closing in on the launch of TKO Group Holdings. Share repurchases and dividends will begin in Q3, remains focused on maintaining prudent capital allocation.

CONSUMER CYCLICAL:

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  Stellantis (STLA) - The UAW union said the Chrysler parent was seeking concessions in bargaining talks, including cuts to medical coverage. UAW said that the automaker opposed an end to two-tier wages, a practice of newer workers getting paid much less than veteran workers. UAW is seeking more than 40% pay rises over four years, significant additional time off, and a restoration of defined benefit pensions previously eliminated for newer workers.


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  Rivian Automotive (RIVN) - Q2 adj. EPS -1.08 (exp. -1.41), Q2 revenue USD 1.12bln (exp. 1bln). Due to the progress seen on its production lines, production ramps, and the supply chain outlook, it raised its 2023 production guidance, and its progress on cost management also continued, so it raised adj. EBITDA guidance, while it is also lowering CapEx guidance with the reduction largely driven by a timing shift of some expenses into 2024. Now sees FY vehicle production at 52k units (prev. 50k). Sees FY adj. EBITDA loss of USD 4.20bln (prev. saw a loss of USD 4.30bln, street expected a loss of USD 4.18bln); FY CapEx seem at USD 1.70bln (prev. 2.00bln, exp. 1.9bln). Expects to achieve positive gross profits in 2024.


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  Honda Motor (HMC) - Q1 sales JPY 4.62tln (exp. 4.59tln), Q1 PBT JPY 514bln (exp. 370bln); to conduct a 3-for-1 stock split effective 1st October.


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  Tesla (TSLA) - Italy government reportedly had talks with the automaker over a possible investment in the country, Il Sole 24 reports citing industrial sources; talks were at very preliminary stage, the report added.


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  PENN Entertainment (PENN) - PENN and ESPN enter a long-term exclusive strategic alliance for US online sports betting. PENN secured exclusive rights to ESPN Bet trademark for online sports betting in US for an initial 10-year term and will make USD 1.5bln in cash payments to ESPN over the initial 10-year term. Penn also announced it has divested Barstool Sports to founder David Portnoy.


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  Dutch Bros (BROS) - Q2 adj. EPS 0.13 (exp. 0.07), Q2 revenue USD 249.9mln (exp. 253.4mln), Q2 system same shop sales +3.8%. Announced a management transition; President Christine Barone will become CEO on January 1st, 2024. Sees FY23 revenue at the lower end of the USD 0.95M-1.0bln range (exp. 0.97bln), sees FY23 same shop sales growth in the low single digits.


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  Hyundai Motor (HYMPY) - Hyundai Motor is building a new USD 5.54bln EV manufacturing plant in Georgia.


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  Continental (CTTAY) - Lowered its outlook due to declining European and North America performance. Q2 adj. EUR EBIT 497mln; sees FY sales between EUR 41.5-445bln (prev. saw EUR 42-45bln); consolidated sales outlook lowered to EUR 41.5-44.5bln (prev. 42-45bln). Expects significantly higher material, wage, energy and logistics costs.


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  Flutter Entertainment (PDYPY) - Earnings rose 76%, and its US unit posted its first profit. H1 revenue GBP 4.8bln (prev. 3.4bln Y/Y), H1 EBITDA GBP 765mln (prev. 434mln Y/Y), EPS GBP 0.738 (prev. 0.647p Y/Y). Working towards US listing in late Q4 2023/early Q1 2024.

CONSUMER STAPLES:

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  Grocery Outlet (GO) - Q2 adj. EPS 0.32 (exp. 0.26), Q2 revenue USD 1.01bln (exp. 976mln), Q2 comparable store sales +9.2%. Exec said performance was driven by strong same store sales growth, gross margin expansion. Lifts FY23 adj. EPS outlook to between 1.04-1.08 (exp. 1.01, prev. 0.96-1.00), and lifts FY23 revenue outlook to USD 3.95bln (prev. 3.9bln, exp. 3.9bln), and sees FY23 comparable store sales +7-8% (prev. 5-6%).

FINANCIALS:

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  ABN AMRO (AAVMY) - Q2 net EUR 870mln (exp. 576.3mln), Q2 Loan-loss recovery EUR 69mln (exp. provision 96.4mln). NII 1.62bln (exp. 1.64bln Y/Y). Sees FY costs around EUR 5.2bln (prev. saw around 5.3bln). Interim dividend set at EUR 0.62 per share. Exec said that credit quality remains solid, impairment releases of EUR 69 million; buffers remain in place. Continued strong NII was seen, benefitting from the higher interest rate environment. All client units contributed with improved net profit.


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  PayPal (PYPL) - Executive Vice President, Chief Strategy, Growth and Data Officer Jonathan Auerbach will depart on June 1st. PayPal recently said it would soon name a new CEO.


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  Upstart Holdings (UPST) - Shares dropped by almost 20% afterhours on weak guidance for Q3. Q2 adj. EPS 0.06 (exp. -0.07), Q2 revenue USD 136mln (exp. 135.3mln). Q3 revenue seen around USD 140mln (exp. 155.4mln).


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  Italian Banks - Italy government acted to limit the impact of the surprise windfall tax on banks; the levy on banks’ net interest income will be capped at 0.1% of risk-weighted assets, which is a fifth of the level analysts had suggested the levy could reach, The Times reports.


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  KKR (KKR), Telecom Italia (TIIAY) - Italy and KKR in talks for the private equity company to co-invest alongside the government in Telecom Italia's fixed-line grid, Reuters reports.

INDUSTRIALS:

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  ZipRecruiter (ZIP) - Tumbled 12.5% afterhours. Q2 revenue USD 170.4mln (exp. 169.6mln), Q2 adj. EBITDA USD 43.3mln. Exec said it was a challenging macroeconomic backdrop. "The number of job openings and employers' willingness to pay for those job openings has been declining significantly from the peaks of prior years. Q3 sales seen between USD 147-153mln (exp. 170.8mln), and it is withdrawing its FY23 adj. EBITDA guidance; exec said the atypical hiring patterns seen in H1 gives limited visibility beyond Q3, adding that Q4 has typically been a seasonally softer period for hiring, and it does not yet have a clear view of when employers' confidence will recover.


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  Axon (AXON) - Rose 10% afterhours. Q2 adj. EPS 1.11 (exp. 0.62), Q2 revenue USD 374.6mln (exp. 350.5mln). Now sees FY23 revenue between USD 1.511.53bln (exp. 1.46bln) from 1.44-1.46bln, maintained FY adj. EBITDA margin view of 20%.


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  LegalZoom (LZ) - Fell 5.9% afterhours. Q2 EPS 0.10 (exp. 0.10), Q2 revenue USD 168.9mln (exp. 167.1mln), Q2 subscription revenue USD 102.2mln (+12% Y/Y).

MATERIALS:

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  Brenntag (BNTGY) - Q2 revenue EUR 4.26bln (exp. 4.64bln), Q2 EPS 1.23 (prev. 1.86 Y/Y). Cuts midpoint of its FY23 operating EBITDA guidance. Exec said there were positive trends in business in the focus industries Pharma and Water Treatment, but it was not enough to fully offset the subdued demand in other focus industries, where customers ran down inventories that had been built up and waited for prices to fall.

HEALTHCARE:

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  Halozyme Therapeutics (HALO) - Rose 4% afterhours following earnings. Q2 adj. EPS 0.74 (exp. 0.63), Q2 revenue USD 221mln (exp. 200mln). Lifts FY23 adj. EPS outlook to between 2.65-2.75 (exp. 2.61, prev. 2.50-2.65), and lifts FY23 revenue outlook to between USD 825-845mln (exp. 823mln, prev. 815-845mln).


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  Insulet Corporation (PODD) - Fell 2.6% despite topping earnings and sales expectations, and raising FY revenue guidance. Q2 EPS 0.38 (exp. 0.26), Q2 revenue USD 396.5mln (exp. 385mln). Q3 revenue seen +18-21% Y/Y (exp. 400.9mln); lifts FY23 revenue growth view to +22-25% (exp. 1.6bln) from +18-22%.

REAL ESTATE:

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  WeWork (WE) - Q2 EPS -0.21 (prev. -0.76 Y/Y), Q2 sales USD 844mln (prev. 815mln Y/Y), Said substantial doubt exists about its ability to continue to stay in business, due to the company’s losses, projected cash needs, and increased member turnover.

09 Aug 2023 - 09:30- Research Sheet- Source: Newsquawk