US EARLY MORNING: US equity futures start the last full trading week of the year with small gains

US PREMARKETS: US equity futures start the last full trading week of the year with slight gains, though are off highs. News flow has been light over the weekend, with markets continuing to digest Fedspeak ahead of PCE data later this week (see our week ahead, below, for our primer). Treasury yields are lower across the curve, with the short-end outperforming amid the curve bull-steepening. After NY Fed President Williams Friday leaned back on the market’s pricing for the Fed’s expected rate path in 2024, money markets have resumed dovishly, and once again are almost completely pricing in six 25bps rate cuts next year, despite official Fed forecasts only pencilling in three. The first cut is fully priced for May, though there is an 80% chance it could be seen in March. Fed’s Bostic sees two rate cuts next year, he said on Friday, while the Fed’s Goolsbee said that although inflation has made progress, and unemployment is still low it was still too soon to declare victory, adding that rate decisions will be based on incoming data; he also said that the Fed may need to shift its focus back onto the jobs side of its mandate. The slate for today is thin.

TODAY’S AGENDA:

• Our interactive calendar can be accessed here; a PDF version can be downloaded here.


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  DAY AHEAD: The week starts on a quiet note, with only the German Ifo standing out. On the speaker's front, Norges Bank Governor Bache will speak at its regional network event. ECB's Schnabel (Hawk) and ECB's Lane will speak on fiscal policy and EMU governance. BoE's Broadbent will speak at the London Business School. The US day only has the NAHB Housing Market Index data for December on the schedule. Fed's Goolsbee (2025 voter) appears on CNBC, though he has already given interviews over the weekend, where he said that although inflation has made progress, and unemployment is still low it was still too soon to declare victory, adding that rate decisions will be based on incoming data; he also said that the Fed may need to shift its focus back onto the jobs side of its mandate.


• 
  WEEK AHEAD: Highlights include US PCE; BoJ, PBoC, BOC and RBA Minutes; CPI from Japan, UK, Canada. Our week ahead briefing can be accessed here. US corporate earnings reports being published this week include ACN and FDX on Tuesday; MU on Wednesday; CTAS and NKE on Thursday. Our Weekly US Earnings Estimates note is here.

EQUITY NEWS:

MACRO:

• 
  Barron's 2024 Call - Barron’s 10 Favourite Stocks for 2024, its annual list of unloved stocks, includes Alibaba (BABA), Alphabet (GOOGL), Barrick Gold (GOLD), Berkshire (BRK), BioNTech (BNTX), Chevron (CVX), Hertz (HTZ),  Madison Square Garden Sports (MSGS), Pepsi (PEP), U-Haul (UHAL). More broadly, the newspaper notes that stocks beat the odds this year to rise, and they can do it again in 2024. They might have a bumpy start to the new year, but Barron's says stocks should finish stronger as interest rates fall, and advises investors to 'stay invested'. Elsewhere, Barron's says tech stocks are poised for another big year. And on dividend names, Barron's notes that Boeing (BA), American Airlines (AAL), Royal Caribbean (RCL), Carnival (CCL) cut dividends, but argued now was the time to bring back their payouts to shareholders.

TECH:

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  Apple (AAPL) - Chinese agencies and state-backed companies urge staff to avoid bringing foreign devices like Apple iPhones to work, Bloomberg reports, part of a long-term effort to promote domestic technology use, favouring local brands and emphasising self-reliance in technology across various provinces.


• 
  Adobe (ADBE) - Adobe and Figma representatives met DOJ officials to try and secure approval for its USD 20bln deal. No decision has been made yet, but DOJ involvement suggests a potential challenge, concerned about competition suppression as Figma is seen as a threat to Adobe, Politico says.


• 
  Microsoft (MSFT) - OpenAI altered its website description from Microsoft as a "minority owner" to holding a "minority economic interest," FT notes, adding that as scrutiny on Silicon Valley's opaque deals intensifies, the AI company's ownership structure, entitling investors to profits from a specific subsidiary, raises questions.


• 
  Alphabet (GOOG) - Epic Games CEO expressed concern that Google might evade repercussions despite Epic's legal win over the app store issue. CEO is worries about Google's potential "fake" remedies after court findings of Android ecosystem abuse, Epic accused Google of stifling competition to maintain a high 30% commission fee, FT reports. The court will determine necessary business alterations.


• 
  DocuSign (DOCU) - DocuSign explores a potential sale, WSJ reports, engaging advisers for a possible significant leveraged buyout. Early talks suggest interest from private equity and tech firms, although no deal is assured.


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  Hewlett Packard Enterprise (HPE) - Announced Marie Myers will join as executive vice president and chief financial officer in January. Myers has served as CFO of HP Inc. (HPQ) since 2021.


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  Software AG (STWRY) - Sells Webmethods and Streamsets for EUR 2.13bln, expected to conclude in Q2-2024. Additionally, decision to issue a public delisting tender offer with Silver Lake/Mosel Bidco offering to shareholders to acquire all no-par value registered shares with a proportionate interest in share capital of EUR 1/shr. Bidder intends to offer a cash consideration of EUR 32/shr.

COMMUNICATIONS:

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  Netflix (NFLX), Disney (DIS), Warner Bros. Discovery (WBD) - To ease financial strains, studios are revisiting Netflix deals, sending older shows and movies for cash despite prior exits, NYT reports. Disney, Warner Bros. Discovery relent, offering titles like "Dune" and "Young Sheldon," acknowledging the necessity for revenue, benefitting Netflix.

FINANCIALS:

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  Apple (AAPL), Visa (V), Mastercard (MA) - A proposed class action alleges Apple, Visa, and Mastercard conspired to limit competition in payment card networks, resulting in inflated transaction fees for merchants, Reuters reports. Mirage Wine & Spirits filed the complaint in East St. Louis federal court, claiming unlawful agreements between Apple, Visa, and Mastercard that hindered competition.


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  Visa (V) - Visa strikes a deal to acquire a majority stake in Mexican payments processor Prosa. Prosa will retain independence with its technology while Visa aims to enhance its offerings with new digital solutions and other initiatives.


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  BlackRock (BLK), State Street (STT) - BlackRock and State Street have both been subpoenaed in the US House's ESG probe, Bloomberg reports. The House panel is looking into allegations of collusion by the firms. State Street said it is confident it did not break antitrust law.


• 
  Robinhood (HOOD) - Robinhood is attracting customers with fatter wallets from other brokerages, WSJ reports. The article said that it received about USD 1.1bln in account transfers since October, when it began offering a 1% match on transferred brokerage accounts. And in Q2 and Q3 of this year, customers transferred about USD 350mln and USD 375mln respectively, to Robinhood from other brokerages.


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  Crypto, Coinbase (COIN) - SEC Friday denied a petition by Coinbase seeking new rules from the agency for the digital asset sector, which the country's largest crypto exchange then sought to challenge in court, Reuters reports. The five-member commission voted 3-2 to not propose new rules because it fundamentally disagreed that current regulations are "unworkable" for the crypto sphere, as Coinbase has argued. Coinbase later said it had filed a petition for review of the SEC's decision in court, Reuters added.


• 
  KKR (KKR) - KKR's credit business acquires USD 7.2bln of super-prime RV loan portfolio from BMO Bank. Simultaneously, BMO purchased around USD 6.4bln senior notes tied to the sold loans. BMO remains loan servicer, preserving stability for dealers, borrowers, and staff.


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  Auto Loans - Data from Edmunds revealed negative equity on automobiles was at the highest level in more than three years, with higher prices and borrowing costs hitting owners, Bloomberg reports. Owners' average negative equity hit USD 6,054 in November, heightening financial strain amidst surges in car buying, interest rates, and repossessions.


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  Student Loans - After the pandemic freeze on federal student loan bills ended, just over half of the 22mln borrowers made payments in October, NYT reports. This follows warnings about the challenge of resuming payments after a long break, despite the Biden administration's unsuccessful attempt to forgive up to USD 20k in debt per borrower.


• 
  BNPL - Buy Now, Pay Later is keeping people spending without credit agencies knowing, with consumers flocking to installment loans for everything from groceries to laser eye surgery, WSJ reports.

CONSUMER:

• 
  LVMH (LVMUY), Richemont (CFRUY) - Cautious mention for luxury names in Bloomberg; says luxury stocks like LVMH anticipate a reversal in 2024 after China's 2023 consumer splurge weakened, but analysts see a slow start to 2024, though do expect a stronger second half, hinging on revived Chinese demand critical for luxury market recovery.


• 
  Macy's (M) - Women's Wear Daily notes that Macy's is in play after receiving a low-ball takeover bid this month, sources say Sycamore Partners could emerge as a bidder. Sources believe Sycamore has the wherewithal and has raised debt, despite the tough borrowing climate, in preparation for what could be an all-cash offer to buy the retailer, WWD wrote, adding that next year, interest rates are likely to be more favourable for M&A.


• 
  Amazon (AMZN) - Positive mention in Barron's; said Amazon stock was a buy due to its booming cash flow.


• 
  AB InBev (BUD) - Anheuser-Busch InBev's union workers, 99% of whom are Teamsters, authorised a strike at 12 US breweries due to stalled contract talks. Demands include improved wages, healthcare, retirement benefits, and job security for 5,000 workers by February's end.


• 
  General Motors (GM) - GM's Cruise unit is facing challenges, risking being a failed venture. Layoffs signal trouble as a pedestrian accident in October exacerbates issues, CNBC reports. But despite the setbacks, GM's CEO Barra remains determined to salvage Cruise, aiming to "right the ship." WSJ has a cautious mention for CEO Barra; says she has spent a decade transforming GM, but it has not been enough; she pushed GM hard into EV and driverless cars, but the finish line keeps moving farther away.


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  Nissan (NSANY) - Nissan plans to sell EVs developed in China worldwide, collaborating with a leading Chinese university for research acceleration, Reuters reports. The automaker eyes exporting existing and future electric and plug-in hybrid cars from China to global markets, aiming for broader international presence.


• 
  China EVs - US expresses concern over Chinese investment in electric vehicles in Mexico, FT reports. Chinese firms like MG, BYD, Chery plan factories and a Chinese company also aims for a USD 12bln battery plant. This raises US-Mexico tension amidst the trade war.


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  Tesla (TSLA) - Dutch vehicle authority RDW said it had no immediate plans for a Tesla recall in Europe, despite the recent US recall over Autopilot concerns. RDW highlighted disparities in Autopilot features between the markets and is communicating with Tesla.


• 
  Li Auto (LI) - Positive mention in Barron's for Li Auto and BYD; said the stocks have gotten slammed, but both can sell cheap cars profitably.


• 
  Entain (GMVHY) - Is reportedly in talks to give a board seat to Eminence Capital's Ricky Sandler, according to sources; expected to be announced by end-2023, Sunday Times said.

ENERGY:

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  US Shale M&A - Tokyo Gas Co. subsidiary to buy Rockcliff Energy II LLC for USD 2.7bln, BBG reports, expanding its US shale gas presence. Through TG Natural Resources, it will acquire all shares of Rockcliff, a Quantum Energy Partners portfolio company, amid a surge in energy industry deals driven by soaring resource prices.


• 
  Shale Oil - Bloomberg notes that US shale, once discounted by OPEC, resurges, surpassing predictions. Production spikes in Permian Basin and Bakken Shale have been seen, hitting record highs amid OPEC's supply cuts. This time last year, US government forecasters predicted domestic production would average 12.5mln BPD during the current quarter, BBG says, but in recent days, that estimate was bumped to 13.3mln, adding that the difference is equivalent to adding a new Venezuela to global supplies.


• 
  Russia Supply - Russia will hastens oil export cuts, officials said, possibly by 50k+ BPD in December, aiming to bolster global prices, Reuters reports. Saudi Arabia and Russia seek unified output reductions among OPEC+ members after a discordant producers' meeting.


• 
  Eni (E) - In talks with interested funds around the purchase of a minority stake in Novamont, which would value the unit at EUR 1bln, Reuters said.

MATERIALS:

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  Anglo American (NGLOY) - The Times carries a piece titled 'Mined diamonds are no longer a girl’s best friend', and notes that the emergence of synthetic lab-grown gems has dented the traditional mining powerhouses such as De Beers owner Anglo American. Lab-grown stones now account for around 18%+ of the market (vs 0.3% in 2015).


• 
  CRH (CRH) - Entered an agreement to acquire Adbri for AUD 2.1bln.

INDUSTRIALS:

• 
  Lockheed Martin (LMT) - Awarded USD 663mln Navy contract modification to provide logistics support, awarded USD 138mln Navy contract to procure various special tooling and special test equipment, and awarded a USD 157mln Missile Defense Agency contract modification under Aegis Ballistic Missile Defence Weapon Systems contract.


• 
  Northrop Grumman (NOC) - Awarded a USD 164.2MLN Defence Logistics Agency contract for F/A-18 weapon system supplies.


• 
  Rolls-Royce (RYCEY) - Rolls royce is in talks with Ukraine's DTEK to construct small modular nuclear reactors within the nation at sites which currently have coal power stations, The Telegraph reports.

HEALTHCARE:

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  Illumina (ILMN) - The US appeals court deemed Illumina's USD 7bln acquisition of Grail violated antitrust laws but referred the case back to the FTC for a fresh review. While acknowledging competition concerns, the court ruled the FTC misapplied antitrust standards, prolonging the resolution in a trans-Atlantic legal battle over the sale. After the report Illumina said it will divest Grail after the companies battled both US and EU antitrust enforcers for more than two years and faced fierce opposition from activist investor Carl Icahn. The divestiture will be executed through a third-party sale or capital markets transaction, adding that it would finalise the terms by Q2, Reuters said.


• 
  Bristol Myers Squibb (BMY) - Halted a Phase 3 RELATIVITY-123 trial on nivolumab and relatlimab combo for metastatic colorectal cancer due to futility, unlikely to meet primary endpoints. No safety concerns found, but efficacy fell short for microsatellite stable tumors. The company aims to explore the combo in other cancer types while continuing approved melanoma treatments.


• 
  Merck (MRK) - The FDA has expedited the approval of Merck's KEYTRUDA with Padcev for treating advanced or metastatic urothelial cancer in adults, almost five months earlier than the expected PDUFA goal date of May 2024.


• 
  Pfizer (PFE) - The FDA greenlit Padcev to treat adults with locally advanced or metastatic urothelial cancer. It's the initial approved combination, providing an alternative to platinum-based chemotherapy, the current first-line standard for la/mUC treatment.


• 
  Hikma (HKMPY) - Receives US FDA ANDA supplemental approve 16, 17 for Oxymorphone Hydrochloride.

18 Dec 2023 - 09:30- Data- Source: Newsquawk