US EARLY MORNING: US equity futures are treading water ahead of inflation data due today

US PRE-MARKETS: US equity futures are flat, Treasury yields are a touch lower, the Dollar Index is flat; crude benchmarks are a little higher. Traders are awaiting the key US CPI data for October, which is expected to show a cooling in the headline rate of annual inflation, though the core measure of annual inflation is expected to be unchanged (our preview is below). The data will help set expectations for the Fed's future rate trajectory. There is also a heavy amount of Fedspeak on the slate today, with comments due from Vice Chairs Jefferson and Barr, while the NY Fed's Williams is also due to speak. The monthly fund manager survey from Bank of America has been released, and says investors remain cautious on macro, but have turned bullish on interest rates. Most surveyed (74%) see a soft landing or no landing for the US economy, with most (76%) of the view that the Fed has concluded its hiking cycle; the survey finds that investors expect lower bond yield in one years’ time (61% - the most on record, BofA says). In terms of asset allocation, BofA says investors are the most overweight bonds since the financial crisis, while investors have also moved overweight equities for the first time since April 2022, with cash balances declining to the lowest since November 2021.

PREVIEW - US CPI (13:30GMT/08:30EST): Consumer prices are expected to rise +0.1% M/M in October (prev. +0.4%), with the annual rate seen easing to 3.3% Y/Y (prev. 3.7%). Core CPI is seen rising +0.3% M/M in October, matching the rate of growth seen in September, while the annual rate of core inflation is expected to be unchanged at 4.1% Y/Y. The October data is likely to have been driven by stable energy prices and possible declines in vehicle prices, as high borrowing costs reduce consumer demand. JPM explains that, if the consensus view is accurate, it would be the softest monthly change since May, and would likely be a function of a 2.4% decline in energy prices in October (which itself would be the first monthly decline since May). Analysts will be mindful of the impact of medical expenses; WSJ explains that in October, the BLS incorporates new data on the profitability of health insurers. Medical care has been a drag on CPI in the last year, but will contribute to core CPI for at least the next 6 months; Goldman Sachs estimates this will add 4bps to core CPI in October. The PCE inflation data (the Fed's preferred gauge) is calculated slightly differently, WSJ notes. The University of Michigan’s prelim sentiment data for November showed consumer one-year inflation expectations ticking up for a second straight month, to a seven-month high (at 4.4%), while the 5-10yr gauge rose to the highest since March 2011 at 3.2% (from 3.0% in October). However, the NY Fed's own Survey of Consumer Expectations saw the 1yr ahead inflation expectation ease to 3.6% from 3.7%; while the 3yr view was unchanged at 3.0%; the 5yr view eased a little to 2.7% from 2.8%. The incoming inflation data will form a key part of how the Fed proceeds with policy; Chair Powell last week endorsed a cautious approach to policy. He said officials were committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time, and the FOMC is not yet confident that it has achieved such a stance, adding that if officials feel that it is appropriate to tighten policy further, they would not hesitate to do so, noting that ongoing progress toward target was not assured, and inflation readings have recently given “a few head fakes.” Powell said the Fed would continue to “move carefully” on policy so that it can “address both the risk of being misled by a few good months of data, and the risk of overtightening.”

TODAY’S AGENDA:

• Our interactive calendar is available here; a pdf version can be downloaded here. Eurozone flash GDP data for Q3 and German ZEW survey for November are the highlights. ECB chief economist Lane, ECB’s Centeno and Elderson as due to give remarks today. The US Day will be focussed on CPI data for October, where the annual rate of headline inflation is seen easing, while the core rate of annual inflation is seen unchanged (see above for primer). Fed Vice Chair Jefferson, Fed’s Williams (voter), Barr (voter), Goolsbee (voter) and Mester (2024) are due to speak. After hours, the API will report its weekly energy inventory stats. Today, earnings reports are due from Home Depot (HD) (earnings expectations are here).

EQUITY NEWS:

INDUSTRIALS:

• 
  3M (MMM), DuPont (DD) - Multiple US municipalities have challenged the proposed USD 11bln settlements with 3M, DuPont, and others over PFAS contamination, claiming the deals insufficiently cover cleanup and legal costs related to polluted water, Reuters reports.


• 
  Johnson Controls (JCI) - Johnson Controls had a cybersecurity incident affecting IT infrastructure, but most systems are restored. An investigation ongoing; unauthorised activity has been contained. There was no evidence of product/service impact. It is delaying its Q4 earnings report becauseof the system disruption caused by the attack; results are likely by December 14th, it said.


• 
  Airbus (EADSY) - Airbus is said to be nearing its first order for widebody aircrafts, with EgyptAir reportedly set to buy 10 A350-900 jets on the second day of the Dubai Air Show.


• 
  General Dynamics (GD) - General Dynamics unit awarded USD 2.5bln contract for electronic health record modernisation by the Indian health service; contract has a five-year base period with five optional years.


• 
  Aecom (ACM) - Q4 adj. EPS 1.01 (exp. 0.98), Q4 revenue USD 3.842bln (exp. 3.69bln). Sees FY24 EPS between 4.35-4.55 (exp. 4.32). Increases its share repurchase authorisation to USD 1bln, and raised quarterly dividend +22% to USD 0.22/shr.


• 
  AerCap Holdings (AER) - AerCap's GE Capital subsidiary offered 26.72mln shares in a public offering (price range was between USD 64.65-66.00). AerCap plans a USD 500mln share buyback at the offering price, funded with cash on hand, counting toward its existing repurchase programme.


• 
  J.B. Hunt (JBHT) - GMXT, BNSF, and J.B. Hunt introduce faster Monterrey-Silao-Bajio to Pantaco-Mexico City intermodal service via Eagle Pass, Texas, starting Jan 1st. Offers quicker transit, increased reliability, and sustainable cross-border transportation.


• 
  Toshiba (TOSYY) - H1 net loss JPY 52.1bln (prev. profit of 100.7bln Y/Y), pretax loss JPY 39.4bln (prev. profit of 130.5bln Y/Y).

TECH:

• 
  Foxconn (HNHPF) - The world's largest contract electronics maker Foxconn reported a surprise rise in quarterly profits, topping analyst expectations. Q3 net TWD 43.1bln (exp. 34.0bln), Q3 operating profit TWD 46.2bln (exp. 39.5bln), Q3 revenue TWD 1.54tln (exp. 1.55tln). Sees Q4 revenue declining slightly Y/Y at the headline level, for its computing products unit, its smart consumer electronic products, its cloud/networking unit and its computing products unit; components and other products is expected to see significant Y/Y growth in Q4. For FY23, sees revenue slightly declining Y/Y (prev. guided slight decline).


• 
  Apple (AAPL) - Apple-supplier Imagination Technologies plans to lay off 20% of its workforce due to a challenging business environment, Reuters reports. Canyon Bridge acquired Imagination in 2017 after Apple said it would develop its own graphics technology, which sent the company's shares lower.


• 
  MicroStrategy (MSTR) - Director Carl Rickertsen sold 2,000 class A shares on November 9th for USD 503.98/shr.


• 
  Semiconductors - Chinese imports of semiconductor manufacturing equipment +93% on the year last quarter to CNY 63.4bln (USD 8.7bln).

COMMUNICATIONS:

• 
  Vodafone (VOD) - Vodafone reiterated FY guidance after Q2 sales topped expectations following price hikes. Q2 Organic Service Revenue +4.7% (exp. 4.1%); H1 Revenue EUR 21.9bln (exp. 21.53bln); Operating profit EUR 1.66bln (exp. 2.29bln); Adj. EBITDA EUR 6.38bln (exp. 6.39bln); Adj. EPS EUR 3.43c (prev. 5.90c Y/Y). Confirms FY guidance.


• 
  Microsoft (MSFT), Nintendo (NTDOY), Sony (SONY) - Activision Blizzard's "Call of Duty: Modern Warfare 3" finished in first place in the UK charts this week, pushing Nintendo's "Super Mario Bros. Wonder" to third place, Gamesindustry.biz reported.


• 
  Roblox (RBLX) - Director Han Kim purchased 200k class A shares on November 8th at USD 40.23/shr.

CONSUMER:

• 
  Amazon (AMZN), Snap (SNAP) - Amazon strikes deal with Snap allowing direct Amazon purchases from Snapchat ads, similar to its partnership with Meta, The Information reports. Amazon is aiming to expand its reach to compete with TikTok Shop and Shein in the ecommerce sphere.


• 
  Imperial Brands (IMBBY) - Sees H1 profit rising in low single digits, raises dividend. FY adj. revenue GBP 8bln (exp. 9.5bln), Net Revenue GBP 32.5bln (prev. 32.5bln Y/Y), Dividend GBP 1.468/shr (exp. 1.46/shr). Ongoing multi-year buyback with GBP 1.1bln underway for FY24, a 10% increase Y/Y.


• 
  Automakers - UAW President vowed to intensify unionising efforts at non-union US auto plants following successful contracts with Detroit Three automakers, aiming to overcome historical obstacles and pledge a vigorous organising approach, according to Senate testimony.


• 
  Fisker Inc (FSR) - Q3 EPS -0.27 (exp. -0.18), Q3 revenue USD 71.8mln (exp. 72.6mln). Sees FY23 CapEx between USD 225-240mln, and sees FY23 Research and Development expenses between USD 160-190mln, and Selling, General, and Administrative expenses between USD 180-210mln. Said it was in talks with Foxconn (2317 TT) about manufacturing Alaska pick up truck.


• 
  Tesla (TSLA) - Raises prices for Model 3 RWD vehicles in China by CNY 1,500, and the price of Model Y RWD vehicles in China by CNY 2,500, effective November 14th.


• 
  Rivian Automotive (RIVN) - Rivian aims to raise around USD 15bln in debt to construct an EV manufacturing plant in Georgia, Reuters reports. The plant, planned since 2021, expects to employ 7,500 and manufacture 400,000 vehicles annually by 2024.


• 
  Stellantis (STLA) - Stellantis is reportedly preparing to offer a new round of buyouts to roughly half of its US white-collar employees as it continues to cut expenses.


• 
  Coty (COTY) - Coty increases share repurchase programme by USD 600mln to accommodate planned hedged share buyback transaction of additional 25mln shares.


• 
  Entain (GMVHF), MGM Resorts (MGM) - Jefferies downgraded Entain to Hold from Buy. Jeffries said that Entain's restructuring, MGM's own new share buyback programme, as well as other distractions (cyberattack, Formula One in Las Vegas) could result in MGM sitting on the sidelines and not bidding for Entain until it was clear that US market share gains were possible.

HEALTHCARE:

• 
  Elevance Health (ELV), Cigna Group (CI) - Elevance and Cigna's Express Scripts unit settle legal dispute, enabling Elevance to appeal the dismissal of its USD 14.8bln lawsuit, Reuters reports. Elevance initially sued Express Scripts in 2016 for allegedly mishandling drug price negotiations under a contract, and while a central claim was dismissed in March, another claim over reimbursement breaches remained. Settlement terms were not disclosed.


• 
  Catalent (CTLT) - Catalent faces NYSE non-compliance due to delayed 10-K filing. CTLT said it needs more time to complete procedures related to assessment of measurement and timing of non-cash goodwill impairment of about USD 700mln. Anticipates to report nearly 50% decline in COVID-related Revenue for three months ended Sep 30th vs year ago. Expects to reaffirm its previously issued FY24 guidance.


• 
  Ipsen (IPSEY), Genfit (GNFT) - Ipsen and Genfit present Phase 3 trial results on elafibranor for Primary Biliary Cholangitis, revealing significant improvements in disease biomarkers. Elafibranor showed a 47% placebo-adjusted difference in achieving a biochemical response.


• 
  AstraZeneca (AZN) - Imfinzi plus chemoradiotherapy failed the main goal of its late stage trial.


• 
  Roche (RHHBY) - Subcutaneous injection of Tecentriq recommended by the EU’s CHMP for multiple cancer types.

MATERIALS:

• 
  Teck Resources (TECK), Glencore (GLNCY) - Tech Resources is said to be nearing a deal to sell coal business to Glencore, Japan’s Nippon Steel, and South Korea’s Posco in a deal that would value the coal assets close to USD 9bln, Bloomberg reported. The report added that Glencore would take 77% of Teck’s coal business for USD 6.9bln, Nippon would have 20% for USD 1.7bln and Posco 3%.

ENERGY:

• 
  ConocoPhillips (COP) - Director Timothy Leach sold 44k shares on November 9th at USD 114.6409/shr.


• 
  Matador Resources (MTDR) - Matador Resources said its acquisition of 21 Margarita wells in Lea County, New Mexico, earlier in the year contributed to record Q3 production of over 135,000 BOE/day, and averaged 1,600 BOE/day with high oil cuts around 84%.


• 
  Technip Energies (THNPY), IBM (IBM), Under Armour (UA) - Technip Energies creates Reju, innovative polyester textile regeneration company, building on its partnership with IBM and Under Armour.


• 
  Viper Energy (VNOM) - Viper Energy launched a public offering of 9.02mln Class A common stock shares by a selling stockholder. No proceeds go to Viper from the sale.

FINANCIALS:

• 
  US Banks - Moody's takes rating actions on large US banks following the change in the US sovereign outlook. The outlooks on long-term deposit ratings of some units and branches of JPMorgan (JPM), BofA (BAC) and Wells Fargo (WFC) have subsequently been changed to negative from stable. Affirmed certain long-term ratings of rated bank subsidiaries and branches of Citigroup (C).


• 
  Arthur J. Gallagher (AJG) - Arthur J. Gallagher acquires Edgar Insurance Brokers in Cobram, Victoria, specialising in Australian commercial insurance. Terms were undisclosed.

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