US EARLY MORNING: US equity futures pare Tuesday's downside; tech leads gains, helped by MU, BABA, IFNNY

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  OVERNIGHT: APAC stocks were mostly positive albeit with most of the major indices rangebound following the uninspired lead from Wall St, amid a lack of fresh macro drivers and heading into quarter-end. Hong Kong markets significantly outperformed as tech stocks surge on Alibaba’s plan for a six-way split, which spurred speculation that other tech peers could follow suit. US-Sino relations remain fraught, with tensions over Taiwan President Tsai’s planned transit through the US, and after the Biden administration added five Chinese companies to the entity list for allegedly aiding China's repression of Uyghurs. In Australia, CPI data showed a sharp slowdown in February, to 6.8% Y/Y from 7.4%, beneath the consensus 7.1%, which will leave the bias to the downside within the more widely-viewed Q1 CPI data, and could even see the RBA pause when it meets next week (see here). European equities open on the front foot, which is still being framed in the context of easing fears around the global banking sector, though many analysts continue to caution about the outlook while recession fears are building. Data from Germany showed consumer sentiment rising in April to -29.5 from -30.6, slightly above the consensus -29.0; the breakdown showed that willingness to buy and income expectations rose in the latest survey, though the business cycle expectations slipped, which resulted in Gfk suggesting that a full recovery was not in sight anytime soon. Meanwhile, French consumer confidence pared to 81.0 in March, in line with the consensus, and down one point vs February (see here).


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  US  PRE-MARKETS: US equity futures have pared away the downside seen on Tuesday, which was driven by underperformance in large cap names, as well as Tech and Communications sectors. Nasdaq is leading the upside in major indices; overnight in APAC trade, Alibaba’s (BABA) decision to split into six entities was welcomed, helping Asian tech names outperform on hopes other tech rivals could enact similar moves; additionally, there seems to be some support from the chip sector, after Micron (MU) declared supply issues had peaked, while Germany’s Infineon (IFX GY) raised its guidance. Meanwhile, Treasury yields are little changed, with a slight upside bias. The Dollar Index is around flat. The data docket is relatively benign for the day, which should allow the consolidative trading patterns to continue into the US GDP data (third look, released Thursday) and inflation data (both US and Eurozone inflation gauges are released Friday).

DAY AHEAD:

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


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  EUROPEAN DATA/SPEAKERS: There is little on the data slate of note. From the UK, monthly consumer credit and mortgage data is due from the BoE. BoE hawk Mann will also be delivering remarks today, although she has spoken a couple of times already in wake of the recent MPC meeting. From the ECB, the markets head Schnabel is due to make remarks at the NABE on “orienting policy”.


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  NORTH AMERICAN DATA/SPEAKERS: Fed’s supervisory chief Barr will attend a second day of testimonies on Capitol Hill on the regulatory response to the recent bank failures, today appearing before the House Financial Services Committee. On the data front, pending home sales data for February will be released. For the BoC watchers, the Canadian central bank’s deputy governor Gravelle will speak.


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  ENERGY: DoE weekly energy inventory data will be released; the API is said to have reported a surprise draw for crude stocks in its comparable data series, according to Citi: Crude -6.1mln (exp. +0.1mln), Cushing -2.4mln, distillates +0.55mln (exp. -1.5mln), gasoline -5.9mln (exp. -1.6mln).


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  SUPPLY: The US Treasury will conclude this week’s note supply with a sale of USD 25bln of 7yr notes, and will also issue USD 25bln 2yr FRNs. The Portuguese will sell between EUR 0.75-1.0bln of 2032 and 2035 debt.

EQUITY NEWS:

FINANCIALS:

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  UBS Group AG (UBS) - UBS has named Sergio Ermotti as its new Group CEO, effective April 5th, following the acquisition of rival Credit Suisse. Current CEO Ralph Hamers will remain at UBS, and advise the bank during a transition period. Ermotti was group CEO at UBS between November 2011 to October 2020, and is currently Chair of insurance company Swiss Re.


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  Credit Suisse (CS) - Bankers and clients are reportedly being courted by Swiss rivals, according to the FT.


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  Signature Bank (SBNY) - FDIC reportedly told Signature Bank’s crypto clients that their accounts were to close by April 5th, Bloomberg reports.


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  SVB Financial Group (SIVB) - The Fed’s Inspector General has launched its own review of the failure of Silicon Valley Bank, separate from the probe that the Fed’s Vice Chair for Supervision is leading, Bloomberg reported. The IG’s probe will assess the supervision of SVB by the Fed Board of Governors in Washington and examiners at the San Francisco Fed, and will make recommendations as appropriate. The review is expected to be completed within six months.


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  First Republic (FRC) - The bank is reportedly not for sale, Fox Business News reported citing sources; the report said just four of its 270 brokers have resigned, others are seeking employment, but may stay as the situation sorts itself out.


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  Jefferies (JEF) - Q1 EPS 0.54, Q1 revenue USD 1.28bln, Q1 asset management revenue USD 78.3mln, Q1 investment banking and capital markets revenues USD 1.21bln, and Q1 merchant banking revenues of USD 11.6mln. Exec said that despite the significant decline in M&A activity, and a continued lull in the IPO and leveraged finance markets, its Investment Banking business continues to build momentum and was growing market position. Exec added that capital markets continued to be challenging, and does not know when capital markets will return to normalcy.


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  JPMorgan Chase & Co. (JPM) - CEO Jamie Dimon will be deposed over his bank’s ties to Jeffrey Epstein, Bloomberg reports citing sources. No date for the testimony has been set, but is likely to be completed before the end of May.


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  Citigroup Inc. (C) - Citi Securities Services announced Nordnet AB, a digital platform for savings and investments, will be the first Swedish client to start lending through its Citi Securities Lending Access platform.

TECH:

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  Micron Technology Inc (MU) - Q2 adj. EPS -1.91 (exp. -0.86); it made inventory write-downs of USD 1.43bln in the quarter, which had an impact of USD 1.34/shr. Q2 revenue USD 3.69bln (exp. 3.702bln), Q2 adj. gross margin -31.4% (exp. 8.09%), Q2 operating loss of USD 2.08bln (exp. loss of USD 676mln). Now expects overall headcount reduction to approach 15%. Ahead, it sees Q3 adj. EPS USD between -1.51 and -1.65 (exp. -0.90), and sees Q3 revenue around USD 3.7bln (exp. 3.7bln); its Q3 2023 guidance assumes a write down of about USD 500mln associated with inventory produced during the quarter. Exec said that the ‘days of inventory’ peaked in Q2, and it remains confident on long-term demand levels, and believes that the company is close to a shift in sequential revenue growth. Has made additional reductions to fiscal 2023 capex plan, now expects to invest around USD 7bln. Now expects 2023 bit supply growth to be meaningfully negative for DRAM, and 2023 industry bit demand growth is likely to have moderated to about 5% in DRAM, and low teens percentage range in NAND. Elsewhere, exec said data centre revenue bottomed in Q2, and it sees 2023 PC units declining in mid-single digits, and smartphone shipments seen slightly down in 2023.


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  Infineon Technologies AG (IFNNY) - Raises Q2 revenue guidance to “above EUR 4bln” (prev. “around EUR 3.9bln”). Segment Result Margin is now expected to reach a high-twenties percentage (prev. “around 25 percent”). Infineon now forecasts revenue for the full 2023 fiscal year to amount to “meaningfully above the previously expected level” of around EUR 15.5bln. The guidance upgrades were “primarily based on resilient business dynamics in its core automotive and industrial segments.” (Infineon) Co. holds ~3.4% weighting in the DAX 40.


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  Microsoft Corp (MSFT) - The tech giant has offered to change its cloud computing practices to settle antitrust complaints filed by smaller rivals, Reuters reports, a move that will stave off an EU investigation. French cloud computing services provider OVHcloud (OVH FP), Italian cloud service provider Aruba and a Danish association of cloud service providers had complained to the European Commission about Microsoft’s cloud practices and licensing deals.


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  Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOG), Disney (DIS), Netflix (NFLX) - Makers of smart speakers, including Amazon and Google, will have to offer all licensed UK radio stations access to their platforms as part of an overhaul of UK broadcasting rules, FT reports. The requirement will be included in a media bill, to be introduced on Wednesday, which will regulate online streaming platforms for the first time. FT adds that the draft legislation will give regulators oversight of content available from services such as Netflix and Disney, which the government said would level the playing field for UK-based broadcasters.


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  Alphabet Inc. (GOOG) - Cloud software development platform Replit announced a new strategic partnership with Google Cloud; Replit developers will get access to Google Cloud infrastructure, services, and foundation models via its software development AI, while Google Cloud and Workspace developers will get access to Replit’s collaborative code editing platform.


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  FleetCor Technologies, Inc. (FLT) - Appoints Tom Panther as CFO, effective May 12th. Panther was previously CFO at EVO Payments prior to its acquisition by Global Payments.

COMMUNICATIONS:

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  Dave & Buster’s Entertainment, Inc. (PLAY) - Q4 EPS 0.80 (exp. 0.73), Q4 revenue USD 563.8mln (exp. 534.5mln); Q4 pro forma combined comparable store sales +19%. Announces a USD 100mln share repurchase programme. Q1 QTD SSS are roughly flat-to-down very low-single-digits, but up up against strong omicron recovery Y/Y.


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  Amazon.com (AMZN), AMC Entertainment Holdings (AMC) - Amazon has long considered a possible purchase of AMC, but has not pulled the trigger, Fox Business News reported. Amazon's interest remains, but more as buying a distressed asset. The report added that there was no deal on the table, and there may never be.

CONSUMER CYCLICAL:

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  Alibaba Group Holding (BABA) - Alibaba will host a conference call on Thursday to discuss its new organisational and governance structure, Bloomberg said.


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  Lululemon Athletica Inc (LULU) - Q4 adj. EPS 4.40 (exp. 4.26), Q4 revenue 2.77bln (exp. 2.70bln). Q4 direct-to-consumer revenue +39% (exp. +25.9%). Q4 total comp. sales constant currency +30% (exp. +22.7%), stores comp. sales in constant currency +17% (exp. +18.1%). Q4 gross margin 55.1% (exp. 57.1%), operating margin 11.3% (exp. 28.1%). China revenue increased more than 30% in Q4. Inventory was USD 1.45bln in the quarter (exp. 1.51bln). Exec said it will expand Lululemon Studio premium tier by enabling guests to access its digital fitness content via a new app, launching in the Summer, for a lower monthly fee. Sees Q1 net revenue at USD 1.89-1.93bln (exp. 1.86bln), and sees Q1 adj. EPS view 1.93-2.00 (exp. 1.66). For FY24, sees net revenue view between USD 9.30-9.41bln (exp. 9.1bln), and sees EPS between USD 11.50-11.72 (exp. 11.27).


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  Mercedes-Benz Group (MBG) - The Kuwait Investment Authority (KIA), MBG's third largest shareholder, was reportedly looking to sell 20mln shares at a price guidance of EUR 69.27/shr (vs EUR 71.89 close on Tuesday), Reuters said. The sale would take KIA's stake to under 5% from the current 6.84%.


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  Volvo Car AB (VLVCY) - CEO told Bloomberg that the US Inflation Reduction Act was changing the way it plans to build electric vehicles, it’s changing is its supply base, especially on batteries and probably on minerals as well, and added that it was driving more and more of that technology into North America.


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  Winnebago Industries, Inc. (WGO) - Boatbuilding unit Chris-Craft opened a new manufacturing facility in Florida, which increases its production capacity by 50%, and allows for the full build of boats from start to finish.


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  Lucid Group Inc (LCID) - The EV maker is set to lay off around 1,300 employees, or around 18% of its workforce, as it cuts costs as part of a restructuring drive. The move comes after it last month guided 2023 production levels short of expectations, while it also saw a decline in orders during Q4.


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  Next PLC (NXGPY) - UK retailer Next saw profits rise in the quarter, but its outlook remains cautious. FY22 total trading sales GBP 5.146bln (prev. 4.746bln), PBT GBP 870.4mln (prev. 823.1mln). Basic EPS 5.7340 (prev. 5.3080). Full price sales in January were flat and in line with guidance. "We have prepared (and budgeted) for a difficult year," it said.

CONSUMER STAPLES:

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  Nestle SA (NSRGY) - Nestle has proposed to acquire BRF's pet food division for approximately BRL 1.7bln (USD 330mln), a value marginally lower than the BRL 2bln BRF was targeting for the asset, Bloomberg reports.

INDUSTRIALS:

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  Raytheon Technologies Corporation (RTX) - Raytheon awarded USD 1.23bln contract for Patriot Missile System fire units.

29 Mar 2023 - 09:07- Research Sheet- Source: Newsquawk