US EARLY MORNING: US equity futures rally, with tech leading the upside; PPI, Fedspeak ahead

SNAPSHOT: US equity futures are rallying, with the tech/growth focussed NQ leading gains. Treasury yields are lower by 1-3bps after Fed’s Brainard on Monday backed the FOMC downshifting to a lower increment of rate hikes in December, though reiterated that there was still work to be done. The Dollar Index is lower, seeing downside as Europeans arrived amid a constructive risk backdrop and some technical which were said to be supporting EURUSD; EMFX is supported by some reports out of China where some cities had begun cutting routine community COVID testing. However, COVID cases are still striking concerns in some pockets of the market; Crude futures trade lower, for instance, with reports citing the recent uptick in Chinese COVID cases posing questions on the demand side. Overnight, China activity data missed expectations, with analysts arguing the data continues to allude to a further loss of economic momentum, while the outlook also appears challenging.

OUTLOOK: JPMorgan strategist Marko Kolanovic is reducing his overweight equities position because recession risks remain high, Bloomberg reports. Kolanovic still remains constructive on equities, maintaining a long-term overweight view, but has used the recent rally to reduce overweights. He has been one of Wall Street’s most notable equity bulls, but last month tempered his bullishness citing geopolitical and monetary policy risks, noting that a recession would be hard to avoid. Citadel’s Ken Griffin has this week echoed that theme, telling a conference that it was “hard to believe” that the US can avoid a US recession in H2 2023, though he still thinks that the Fed should continue its fight against inflation: “to take the foot off the brake right now and not finish the job, I think it’s the absolute worst mistake that the Fed could possibly make.” Griffin is confident that the US will end this year with modest growth, but says the issue for 2023 is the lagged effect of the Fed having hiked rates, which “will really start to grind on the economy.”

DAY AHEAD: Eurozone flash GDP for Q3 is expected to confirm growth at 2.1% Y/Y; the German ZEW survey for November is expected to see Sentiment and Conditions improve a little. The US day will see PPI data for October will be released, and like its CPI counterpart, is expected to show some moderation in the rate of price increases. The NY Fed regional manufacturing survey for November will offer initial clues as to how the more widely viewed national ISM data will look when it is released in the early part of December. After hours, the API will release its gauge of weekly energy inventories. The speaker’s slate is busy: in Europe, the ECB’s Villeroy and Elderson are doing the rounds today. Stateside, Fed’s Harker (2023), Cook (voter), Barr (voter) will deliver remarks. The G20 meetings in Indonesia also get underway, where officials have largely stuck to themes telegraphed in advance of the gathering. Home Depot (HD) and Walmart (WMT) will release their numbers today. Full Day Ahead schedule can be accessed here. 

TECH:

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  Taiwan Semiconductor Manufacturing Company Limited (TSM), Berkshire Hathaway Inc. (BRK.B) - Berkshire has purchased USD 4.1bln worth of stock in the world’s largest contract chipmaker Taiwan Semiconductor Manufacturing, a rare foray into the technology sector by the conglomerate, Reuters says. TSMC shares rose in Asia trading.


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  ASML (ASML) - CEO expects a significant increase in chip capacity this decade.


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  Apple Inc. (AAPL) - Apple is offering discounts of up to 10% to companies who buy its Mac in bulk, an effort to cope with a slowdown during the holiday quarter, BBG reports, adding that the tactic is unusual for Apple, suggests it is stepping up efforts to reinvigorate sales.

COMMUNICATIONS:

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  Vodafone (VOD) - H1 revenue EUR 22.9bln (exp. 22.65bln), H1 operating profit EUR 2.93bln (prev. 2.62bln), EPS 0.0352/shr (prev. 0.0340/shr), interim dividend 0.045/shr (prev. 0.045/shr). Sees FY23 adj. EBITDAaL between EUR 15-15.1bln, at the lower-end of original guidance. CEO announces a new cost savings target of EUR 1bln+ focused on streamlining and simplifying.


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  Getty Images Holdings, Inc. (GETY) - Q3 EPS -0.51 (exp. 0.09), Q3 revenue USD 230.5mln (exp. 242mln). SeesFY22 revenue between USD 929-953mln (exp. 947mln).

FINANCIALS:

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  Axa (AXAHY), Banca Monte dei Paschi di Siena SpA (BMPS) - Axa is reportedly negotiating a new deal with BMPS regarding a JV covering life and damage insurance policies, FT reports; Axa is reportedly seeking more lucrative insurance commissions.


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  Credit Suisse (CS) - Accelerates restructuring of investment bank; entered into agreements to sell a significant part of its SPG and other related businesses to Apollo. Expected to significantly de-risk investment bank and release capital for investment in core businesses. Transactions to reduce SPG assets from USD 75bln to around USD 20bln by mid-2023; expected to achieve a release of risk weighted assets up to USD 10bln. Elsewhere, the bank has begun cutting senior bank jobs in Asia, Bloomberg reports.

HEALTH CARE:

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  Amazon (AMZN) - Introduces Amazon Clinic, a virtual health service that delivers health care for common conditions.


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  Eli Lilly and Company (LLY) - Eli Lilly has halted ad spending with Twitter after fake blue-check accounts went viral; LLY official said that “for USD 8, they’re potentially losing out on millions of dollars in ad revenue.”


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  Roche (RHHBY) - Receives FDA approval for VENTANA FOLR1 RxDx Assay as the first IHC-based companion diagnostic to identify ovarian cancer patients eligible for ELAHERE.


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  Illumina Inc (ILMN) - To cut 5% of its global workforce to realign its operating expenses as stubborn inflation and a strong dollar weigh on the genetic sequencing equipment maker’s business, Reuters reports. Expects to take a restructuring charge in Q4.


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  Azenta, Inc. (AZTA) - Board approves a share repurchase authorisation of USD 1.5bln in common stock; intends to repurchase at least USD 1bln over the next year.

CONSUMER CYCLICAL:

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  Sea Limited (SE) - Has cut around 7,000 jobs, or 10% of its workforce, in the last six months, as it fights to win back investors, Bloomberg reports.

INDUSTRIALS:

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  Verisk Analytics, Inc. (VRSK) - Board authorised an incremental USD 3.5bln of share repurchases under its existing share repurchase programme; is authorised to repurchase up to USD 500mln of stock immediately, the remaining USD 3.0bln is conditioned upon the closing of the divestiture of the its Energy business.


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  BAE Systems (BAESY) - UK announces GBP 4.2bln contract for the contractor to construct five Royal Navy ships.

MATERIALS:

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  Carpenter Technology Corporation (CRS) - Will increase base prices by an average of 7-12% on new, non-contract orders across the majority of its premium products.


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  Enviva Partners, LP (EVA) - Announced that President Thomas Meth has been appointed the CEO while retaining his role as President. Current Chair and CEO John Keppler to assume the role of Executive Chairman, consistent with the succession plan.

ENERGY:

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  UK Energy Names - Chancellor Hunt is reportedly preparing a tax of 40% on the ‘excess returns’ produced by electricity generators above a certain price per MWh, FT reports; the price threshold is yet to be determined.

NOTABLE 13F UPDATES:

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  Appaloosa Management 13F - Exits Kohl’s (KSS), Occidental Petroleum (OXY), Micron (MU), Aptiv (APTV), Netflix (NFLX); Reduced stakes in Meta Platforms (META), Alphabet (GOOG), Sysco (SYY), Microsoft (MSFT), Mosaic (MOS).


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  Berkshire Hathaway 13F - Added TSMC (TSM), Louisiana-Pacific (LPX), Jefferies Financial (JEF). Exits STORE Capital (STOR). Raised stakes in Occidental (OXY), Chevron (CVX), RH (RH), Paramount Global Class B (PARA), Celanese (CE). Lowered stake in US Bancorp (USB), Activision Blizzard (ATVI), BNY Mellon (BK), Kroger (KR), General Motors (GM).


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  Elliott Management 13F - Added Triple Flag Precious Metals (TFPM), iShares iBoxx Investment Grade Corporate Bond (LQD), Cardinal Health (CAH), Clarivate (CLVT) Bausch Health (BHC). Exits Diamond Offshore (DO), Principal Financial (PFG). Raised stake in Pinterest (PINS), Valaris (VAL), E2open (ETWO). Lowered stake in Howmet Aerospace (HWM), Uniti Group (UNIT).


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  Greenlight Capital 13F - Added Intel (INTC); exits Atlas Air (AAWW), Chemours (CC), International Seaways (INSW), Plby Group (PLBY), AST SpaceMobile (ASTS). Raised stake in Consol Energy (CEIX), LivaNova (LIVN), Southwestern Energy (SWN), KynDryl Holdings (KD), Concentrix (CNXC). Lowered stake in Global Payments (GPN), Victoria’s Secret (VSCO), Brighthouse Financial (BHF), Green Brick Partners (GRBK).


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  Icahn Enterprises 13F - Added Crown Holdings (CCK); raised stakes in Icahn Enterprises (IEP), Southwest Gas Holdings (SWX); lowered stake in Cheniere Energy (LNG).


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  Lone Pine Capital 13F - Added Autodesk (ADSK), TransDigm (TDG), PTC (PTC), Cheniere Energy (LNG). Exits ServiceNow (NOW), Alphabet (GOOGL), Atlassian (TEAM), Fair Isaac (FICO), Vtex (VTEX). Raised stake in PayPal (PYPL), UnitedHealth (UNH), Booking Holdings (BKNG); lowered stake in Meta Platforms (META), Microsoft (MSFT), Amazon (AMZN), Thermo Fisher Scientific (TMO), First Citizens BancShares (FCNCA).


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  Paulson & Co. 13F - Added Rumble (RMBL). Exits Occidental (OXY), Pacira BioSciences (PCRX), Endo (ENDP). Lowered stake in Horizon Therapeutics (HZNP), APA Corp. (APA), Barrick Gold (GOLD), KraneShares CSI China Internet ETF (KWEB), AngloGold Ashanti (AU).


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  Soros Fund Management 13F - Adds Sierra Wireless (SWIR), Booking Holdings (BKNG), Agree Realty Corp. (ADC), Sarepta (SRPT), Union Pacific (UNP). Exits Albertsons (ACI), Kinder Morgan (KMI), Opendoor (OPEN), Camping World (CWH), Ross Stores (ROST). Raised stakes in BNY Mellon (BK), Disney (DIS), Uber (UBER), Atlassian (TEAM), Invesco QQQ Trust (QQQ). Lowered stakes in Broadband Class C (LBRDK), DR Horton (DHI), Alphabet (GOOGL), Analog Devices (ADI), Starry Group (STRY).


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  Starboard Value 13F - Added Wix.com (WIX), Selina Hospitality (SLNA), Monterey Capital Acquisition Corp (MCAC), Acri Capital Acquisition Corp (ACAC). Exits Elanco Animal Health (ELAN), Corteva (CTVA), Merit Medical Systems (MMSI), Kohl’s (KSS), GigCapital5 (GIA). Raised stakes in Atlantic Coastal Acquisition (ACAH), Legato Merger Corp II (LGTO). Lowered stakes in ON Semiconductor (ON), Huntsman (HUN), ACI Worldwide (ACIW), Mercury Systems (MRCY), CommVault Systems (CVLT).


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  Third Point 13F - Added Bath & Body Works (BBWI), TJX (TJX), Range Resources (RRC), Ferguson (FERG), Take-Two (TTWO). Exits Cenovus Energy (CVE), Crown Holdings (CCK), Archaea Energy (LFG), Membership Collective (MCG), Social Leverage Acquisition Corp. (SLAC). Raised stakes in Colgate-Palmolive (CL), Danaher (DHR), UnitedHealth (UNH), Disney (DIS), T-Mobile (TMUS). Lowered stakes in EQT Corp. (EQT), Antero Resources (AR), Ovintiv (OVV), CSX (CSX), DuPont (DD).


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  Trian Fund Management 13F - Raised stake in Procter & Gamble (PG), General Electric (GE). Lowered stake in Ferguson (FERG), Sysco (SYY).

15 Nov 2022 - 09:30- EquitiesResearch Sheet- Source: Newsquawk