US EARLY MORNING: US equity futures are uneventful; FOMC, CPI are the main events this week, there are also policy announcements due from the ECB, BoE, SNB

• 
  EQUITIES: US equity futures are trading with slight losses. Overnight, APAC stocks were mixed as the region digested recent data releases including soft inflation data in China (see below). European equities opened around flat. This week’s upcoming risk events is also said to be engineering a cautious mood. Today's docket is thin, with traders more focussed on key risk events this week, including central bank policy announcements at the Fed, ECB, BoE, SNB, and some tier one data, including US CPI.


• 
  TREASURIES: Yields are higher along the Treasury curve, which is seeing moderate bear-steepening. A decent NFP report Friday saw yields rise and Fed rate cut bets pare back - there are now four fully priced rate hikes by the end of 2024, with a decent chance of a fifth (prior to the jobs data, five cuts were priced). The data is unlikely to impact this week's FOMC meeting, where an unchanged outing is expected, likely with some pushback against the dovish market-based pricing for rates - traders will be eying the dots for a confirmation that rates have peaked out. Before then, US CPI data is due on Tuesday, where the annual rate of headline inflation is seen paring a touch, though the core rate is expected to be unchanged.


• 
  FOREX: The uneventful action is also being seen in the FX space, with the DXY only a little better than flat, though it is the JPY that is doing the driving, with a report in late APAC hours stating that the BoJ sees little need to end negative rates in December, and does not yet see seen sufficient evidence of wage growth, which would support sustainable inflation, while officials view the potential cost of waiting for more data as not very high. Elsewhere, China's CNY is trading a little softer after the soft inflation figures. EUR is a little better than unchanged.


• 
  COMMODITIES: Crude futures are trading with slight gains. Newswires are framing the upside around the news late last week that the US has sought up to 3mln barrels of crude for the SPR for March delivery. Still, analysts are cautioning about soft demand dynamics and the potential for an oversupplied market early next year.

TODAY’S AGENDA:

• 
  DAY AHEAD: Monday’s events are thin ahead of a huge week for macro events. The highlights on today’s calendar include US Employment Trends data for November, and the NY Fed’s Survey of Consumer Expectations, which comes ahead of this week’s CPI report (released Tuesday). On the speaker's slate, Riksbank's Bunge will speak on the SEK, while ECB's supervisory policymaker McCaul will discuss the green banking sector.


• 
  WEEK AHEAD: Highlights include FOMC, ECB, BoE, SNB; US CPI and China activity data are also due. The Fed is expected to keep rates unchanged, but perhaps lean back against the market’s dovish pricing for rates; US CPI is seen continuing to ease slightly at the headline level, though the annual rate of core inflation is seen unchanged. The ECB is also expected to stand pat on rates this week, with traders focussing on any guidance for when the rate cut cycle will begin. The BoE is also expected to stand pat, which would be its third straight hold; the SNB is seemingly done with rate hikes, and some are looking for a rate cut to come as soon as this week. Our weekly briefing can be accessed here. Major US corporates reporting this week include: ORCL, ADBE, COST; our weekly US earnings estimates sheet can be accessed here.


• 
  REVIEW - CHINA INFLATION: CPI fell to -0.5% Y/Y (exp. -0.1%), the steepest decline since 2020, fuelling fears of stronger deflation in the world's second largest economy. The core rate of inflation was steady at +0.6% Y/Y. The downside to the headline was driven by continued declines in food and energy, as well as in energy prices, though analysts noted that services inflation has actually ticked higher this year, though pared some of the upside seen in recent months as the labour market cools. Core goods inflation rose in the month but Capital Economics said that it still remains low, reflecting price cutting by Chinese manufacturers in a bid to defend export market share as the pandemic boom in global goods demand peters out. "More importantly, services inflation, which more narrowly reflects domestic conditions, declined from 1.2% to a five-month low of 1.0%, adding to evidence of renewed weakness in the labour market." CapEco said that inflation in China looks set to stay low in the near term, but does not expect a deflationary spiral. "Core inflation is likely to rise in the first half of 2024, with the recent step up in policy support on course to boost domestic demand and push up services inflation," CapEco writes, "in addition, food and energy price deflation is likely to alleviate soon due to shifting base effects." It sees CPI averaging 1.0% in 2024.

EQUITY NEWS:

FINANCIALS:

• 
  Nasdaq 100 (NDX) - Its annual reconstitution of the Nasdaq-100 Index, effective before the market open on December 18th, will see the additions of CDW Corporation (CDW), Coca-Cola Europacific Partners (CCEP), DoorDash (DASH), MongoDB (MDB), Roper Technologies (ROP), Splunk (SPLK). As a result of the reconstitution, the following six companies will be removed: Align Technology (ALGN), eBay (EBAY), Enphase Energy (ENPH), JD.com (JD), Lucid Group (LCID), Zoom Video Communications (ZM).


• 
  Brookfield Property (BPYPP) - Brookfield Property Group lodged a complaint against the FDIC for its handling of a USD 33.2bln loan auction from collapsed Signature Bank. Alleging a secretive sales process, Brookfield accused the regulator of favouring lower bids over higher ones, aiming to minimise losses without transparency.

TECH:

• 
  AI Stocks - EU policymakers reached an agreement on its 'AI Act' which aims to regulate artificial intelligence's diverse impacts. The law sets global standards, addressing risks in job automation, misinformation, and national security. It mandates transparency for major AI systems and restricts certain uses, including facial recognition by authorities, with penalties up to 7% of global sales for violators.


• 
  Apple (AAPL) - Apple's VP of product design for iPhone and smartwatch Tang Tan is resigning in February, prompting restructuring in critical product divisions, Bloomberg reports. Tan's deputy Richard Dinh will report to John Ternus, while Kate Bergeron will oversee Apple Watch design.


• 
  Alphabet (GOOG) - Google's showcased Gemini AI model, known for multimodal capabilities, faced criticism after a widely viewed demo was revealed to be significantly faked, TechCrunch reports. The video portrayed interactive abilities that were pre-scripted via text prompts and still images, diverging from live, genuine interaction.


• 
  Nvidia (NVDA) - Nvidia aims to establish a semiconductor base in Vietnam, Reuters reports. During CEO's inaugural visit, the company expressed intent to create a centre in Vietnam, reinforcing its commitment to the region.


• 
  Microsoft (MSFT) - Microsoft is converting 77 contracted temps into unionised employees amidst negotiations with ZeniMax Workers United, Bloomberg reports. 23 staff will obtain full-time roles with a 22% pay rise, while others get temporary positions with increased pay, benefits, and previously denied perks like video game copies they contributed to.


• 
  Palo Alto Networks (PANW), CrowdStrike (CRWD), Zscaler (ZS) - Positive mention in Barron's, which said that these were the stocks to play the cybersecurity boom.

COMMUNICATIONS:

• 
  Paramount (PARA) - Paramount Global's controlling shareholder, Shari Redstone's National Amusements, is exploring a potential sale to Skydance, FT reports, with parties already entering preliminary talks. The deal still might not happen. FT also notes that multiple parties have shown interest in Paramount's assets amid ongoing discussions.


• 
  Advertising, Amazon (AMZN), X (Private) - X is working to lure smaller advertisers as Elon Musk keeps alienating big brands, WSJ reports. The social-media platform has held preliminary talks with Amazon (AMZN) to sell ads through the e-commerce giant’s ad-buying software, the report adds.


• 
  Take-Two (TTWO) - CFO Lainie Goldstein sold 20,701 shares on December 6th at USD 158.0096/shr.


• 
  Vivendi (VIVHY) - Vivendi is looking to secure as much as EUR 300mln for See Tickets, FT reports. Adds that  Anszhutz Entertainment and CTS Eventim are among to bidders thus far.

CONSUMER:

• 
  Macy's (M) - Arkhouse Management and Brigade Capital Management have proposed a USD 5.8bln buyout offer to take Macy's private at USD 21/shr, seeking to acquire the remaining stock, WSJ reports. The bid aims to privatise the department-store chain due to online competition impacting its value.


• 
  Farfetch (FTCH) - Farfetch is seeking a USD 500mln lifeline before Christmas to avoid a bankruptcy, The Times reports.


• 
  LVMH (LVMUY) - The luxury giant has agreed to sell a majority stake in its cruise retail business's parent company to an investor group led by Florida property developer Jim Gissy, Reuters reports. However, LVMH intends to retain a significant minority stake in the newly formed entity.


• 
  Amazon (AMZN) - Amazon filed a lawsuit in Seattle accusing the group REKK of orchestrating a fraudulent refund scheme, allegedly stealing millions in online products between June 2022 and May 2023, NYT reports.


• 
  Unilever (UL) - New CEO is under pressure from top investor Nick Train, who said the consumer staples company is at risk of a break-up, amid years of slow growth, The Telegraph reports.


• 
  Starbucks (SBUX) - Starbucks intends to restart contract negotiations with the newly formed Starbucks Workers United union, aiming to resolve a months-long deadlock after successful union representation votes at around 350 out of 9,000 US stores, FT reports. Talks were halted since May, impacting efforts to secure a contract.


• 
  Asia EVs - France's new EV subsidy rules will grade vehicles based on emissions throughout production and transport. Cars below the threshold won't receive subsidies, Nikkei reports. Favouring local production, French-made EVs may benefit, while most Asian-made ones are likely ineligible due to longer transport distances and energy sources.


• 
  Tesla (TSLA) - Tesla has seen another departure in its AI and autonomous technology team; principal system engineer Bill Chang left in October, Bloomberg reports. Chang recently indicated that he had stepped back from the Dojo supercomputer project, despite his involvement in Tesla's 2022 AI day presentations. Separately, Tesla vehicles were reportedly involved in eight fatal or serious crashes, utilising Autopilot on roads where its use was inappropriate, despite federal officials urging limitations, WaPo reports. These incidents raised concerns about the misuse of Autopilot and its potentially deadly consequences.


• 
  Stellantis (STLA) - The automaker has warned of up to 1,225 job cuts at its Toledo Jeep plant as soon as 5th February 2024.


• 
  Flutter Entertainment (PDYPY) - FanDuel reportedly lobbied for rethink on a proposed ban on the use of certain words on their gambling platform within New York, Guardian reports.

MATERIALS:

• 
  Anglo American (NGLOY) - FTSE 100 miner Anglo American faces potential takeover or merger interest after a GBP 30bln valuation drop under CEO Duncan Wanblad, The Times reports citing analysts. Shares plunged by 20% due to lowered copper production outlook, compounded by challenges in Chile, Peru, and various commodity price declines.


• 
  Iron Ore - Iron ore prices have surged nearly 40% since May, reaching USD 133.95/tonne, despite China's real estate market struggles, FT notes. Chinese steel production soared after officials waived annual production caps to boost economic growth, which led to record steel output and a flooded market, yet iron ore prices spiked amid high demand from China, the newspaper reports.

INDUSTRIALS:

• 
  Boeing (BA) - Boeing promotes Stephanie Pope to the No. 2 position, likely to be named COO soon, positioning her as the potential successor to CEO David Calhoun, WSJ reports. Pope has had a three-decade tenure and leadership in Boeing's services.


• 
  Southwest Airlines (LUV) - Southwest Airlines' flight attendants overwhelmingly rejected a proposed contract offering a 20% immediate pay raise, 3% annual increases till 2028, and a ratification bonus, Bloomberg reports. The vote (11,761 for vs 6,635 against) has prompted resumed negotiations, with the union aiming to secure a more satisfactory collective bargaining agreement.


• 
  Saint Gobain (CODYY) - Saint Gobain is looking for additional acquisitions outside Europe, according to CEO Bazin, who said there were still positions to acquire in the US, Asia and EM, FT reports.

ENERGY:

• 
  Endeavor Energy Partners (Private) - Endeavor Energy Partners, the largest privately-held oil and gas producer in the Permian, is considering a sale, and could be valued between USD 25-30bln, Reuters reports. Founder Autry Stephens, after 45 years, aims to capitalise on industry trends, opting to sell amid a surge in mega deals.

HEALTHCARE:

• 
  Cigna (CI), Humana (HUM) - Cigna cancels plan to merge with Humana due to disagreement over financial terms, opting for a big stock buyback instead, WSJ reports. Shareholders' resistance to the USD 140bln health-insurance giant proposal led to the decision. Cigna now aims for smaller acquisitions amid this shift in focus. Cigna reaffirmed FY23 and FY24 guidance, and the Board approved an increase of USD 10bln in its share repurchase authorisation, bringing the total authority to USD 11.3bln.


• 
  Astrazeneca (AZN) - Results from the ALPHA Phase III trial indicate danicopan's sustained benefits for paroxysmal nocturnal hemoglobinuria patients with clinically significant extravascular hemolysis.


• 
  Bristol Myers Squibb (BMY) - Bristol Myers Squibb presented Phase 3 COMMANDS trial data at ASH 2023, highlighting Reblozyl's efficacy over epoetin alfa in treating anemia in lower-risk myelodysplastic syndromes.


• 
  Genmab (GMAB), AbbVie (ABBV) - AbbVie, Genmab present new data for bispecific antibody epcoritamab; phase 1/2 EPCORE NHL-1 trial data on epcoritamab, demonstrating an 82% overall response rate, 63% complete response rate, and 67% minimal residual disease negativity in relapsed/refractory follicular lymphoma patients.


• 
  GSK (GSK) - GSK's Jemperli plus chemotherapy approve as the first and only frontline immuno-oncology treatment in the EU for dMMR/MSI-H primary advanced of recurrent endometrial cancer.


• 
  HCA Healthcare (HCA) - Positive mention in Barron's; said the stock was a buy, and it was making the best of a bad situation, adding that GLP1 worries are over stated, and it has the scale to achieve earnings growth.


• 
  Novartis (NVS) - Novartis reported positive 48-week extension data from the pivotal Phase III APPLY-PNH trial of Fabhalta in paroxysmal nocturnal hemoglobinuria patients.


• 
  Pfizer (PFE) - Pfizer's Phase 3 trial on marstacimab for severe hemophilia showed significant reduction in annualized bleeding rate (ABR) compared to standard treatment. Consistency across subgroups and secondary endpoints, along with good safety profile, was observed.


• 
  Regeneron (REGN) - Regeneron shared updated data on odronextamab for relapsed/refractory diffuse large B-cell lymphoma (DLBCL) at ASH's 65th Annual Meeting. Odronextamab, a CD20xCD3 bispecific antibody, demonstrated promising response rates and potential as a treatment option. It's undergoing regulatory review for DLBCL and follicular lymphoma. Safety and efficacy are still under assessment.


• 
  Roche (RHHBY) - Presents positive results from phase III Inavo120 study evaluating inavolisib with ibrance and fulvestrant; data from study will be submitted to authorities to bring inavolisib to patients as soon as possible.


• 
  Vertex (VRTX) - Positive mention in Barron's; the newspaper said its painkiller could spark big gains.

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