US EARLY MORNING: US equity futures tread water ahead of jobs data, services ISM, and Eurozone inflation data

US PREMARKETS: US equity futures are treading water ahead of today’s jobs report, ISM data, as well as inflation metrics out of the Eurozone (we preview the jobs data and the Eurozone inflation data below). Treasury yields are up between 2-3bps; Bloomberg noted that the bond complex was "abuzz" on Thursday after a large bearish Treasury bet was placed ahead of today's jobs data; the trade looks for the jobs data to trigger the biggest backup in yields in more than nine months., and targets 10yr yields jumping as high as 4.15% by the close of business today (vs just over 4% currently) - that would mark the largest daily rise in 10yr yields since March. The Dollar Index is higher. Crude futures are also gaining as US Secretary of State Blinken heads to the Middle East, where supply concerns have been supporting crude prices of late – WTI and Brent are both posed to start the first trading week of the year with gains.

PREVIEW - US NONFARM PAYROLLS (13:30GMT/08:30EST): Headline Nonfarm Payrolls are expected to rise by 170k, easing from the prior 199k which was buoyed by the return of striking auto workers. However, analyst expectations are wide, varying between 80k and 225k. The unemployment rate is seen rising to 3.8% from 3.7%, with ranges between 3.6-3.9%. On earnings, the M/M is seen rising 0.3%, easing from the 0.4% prior, with expectations between 0.1 and 0.4% while the Y/Y is expected to ease to3.9% from 4.0%, with analyst forecasts ranging between 3.8% and 4.2%. Labour market proxies saw jobless claims hot around 206k while the 4wk average for December was 208k vs the 220k average in November. The ISM Manufacturing employment print was above expectations but still in contractionary territory, but closer to neutral than what was seen in November. Challenger layoffs eased while the ADP report was hotter than expected on the headline, but the wages metrics had cooled. Meanwhile, the November JOLTS report showed a cooling labour market. The NFP data will be used by both Fed and market participants to gauge when it will be appropriate for the Fed to first cut rates, markets are currently leaning towards the first cut in March, but the Fed have been attempting to dial back these expectations. (Newsquawk)

WEEKLY FLOWS: BofA's weekly flow report notes USD 123.1bln into cash, USD 10.6bln into bonds, USD 7.6bln into stocks, USD 800mln out of gold. By region, USD 3.9bln went into US (second consecutive week), USD 3.7bln into EM (5th consecutive week), USD 900mln out of Europe, USD 80mln into Japan (second consecutive week). In fixed income, USD 8bln went into investment grade bonds (tenth consecutive week), USD 150mln out of high-yield, USD 3.7bln into treasuries (second consecutive week).

TODAY’S AGENDA:

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


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  DAY AHEAD: In Europe, the HICP metrics for December are the highlight (see below for our primer). PPI, and construction PMI data are also due. The US Day is dominated by the jobs report for December, where the headline is expected to print a robust 170k after 199k prior (our preview is below); the Canadian jobs data is due at the same time. Elsewhere, the ISM Services report for December, Factory Orders for November, and Durable Goods revisions for November are also due. Fed’s Barkin (2024) will today deliver further remarks; speaking earlier this week, Barkin said that the Fed was making real progress on inflation, the economy was healthy, and a soft landing looked more likely than a hard landing, but was not inevitable; he added that the potential for additional rate hikes still remains. On the energy front, the weekly Baker Hughes rig count data is due. On the earnings slate, Constellation Brands (STZ) will report in the premarket (expectations here).


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  PREVIEW - EUROZONE HICP (10:00GMT/05:00EST): The consensus looks for headline HICP to tick-up to 3.0% Y/Y from 2.4% in November; the ex-food and energy measure, however, is seen easing to 3.9% Y/Y from 4.2%, while the super core metric is seen modestly declining to 3.5% Y/Y from 3.6%. After inflation data out of Germany, France and Spain, Capital Economics said that it looks for headline and super core inflation of 2.9% Y/Y and 3.3% Y/Y respectively; "this does not change our view that the ECB is most likely to begin cutting interest rates in or around April and that the deposit rate will fall by around 125bps to 2.75% by the end of the year," it says, adding that "this is a little less than is priced into financial markets."


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  PREVIEW - US NONFARM PAYROLLS (13:30GMT/08:30EST): Headline Nonfarm Payrolls are expected to rise by 170k, easing from the prior 199k which was buoyed by the return of striking auto workers. However, analyst expectations are wide, varying between 80k and 225k. The unemployment rate is seen rising to 3.8% from 3.7%, with ranges between 3.6-3.9%. On earnings, the M/M is seen rising 0.3%, easing from the 0.4% prior, with expectations between 0.1 and 0.4% while the Y/Y is expected to ease to3.9% from 4.0%, with analyst forecasts ranging between 3.8% and 4.2%. Labour market proxies saw jobless claims hot around 206k while the 4wk average for December was 208k vs the 220k average in November. The ISM Manufacturing employment print was above expectations but still in contractionary territory, but closer to neutral than what was seen in November. Challenger layoffs eased while the ADP report was hotter than expected on the headline, but the wages metrics had cooled. Meanwhile, the November JOLTS report showed a cooling labour market. The NFP data will be used by both Fed and market participants to gauge when it will be appropriate for the Fed to first cut rates, markets are currently leaning towards the first cut in March, but the Fed have been attempting to dial back these expectations. (Newsquawk)


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  REVIEW - UK HOUSE PRICES: Halifax reported house prices rose +1.1% M/M in December (prev. +0.5%), marking the third straight month of gains in UK house prices as mortgage rates fell, supporting house prices. However, the building society predicts that house prices will fall by 2-4% this year. "The UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move," it wrote, "while wage growth is now above inflation, interest rates are likely to remain elevated for as long as inflation remains markedly above the BoE's target."


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  REVIEW - GERMAN RETAIL SALES: German retail sales declined by -2.5% M/M in November (exp. -0.1%, prev. 1.1%), leaving the annual rate at -2.4% Y/Y (exp. -0.5%, prev. -0.1%). Retail companies had 2.5% less sales in real terms, and 2.6% less in nominal terms after calendar and season adjustments, vs October, in which the largest real sales increase in over a year was achieved. Destatis said the difference between the nominal and real results reflects the increased retail price level, with price inflation slowing significantly in H2 2023.

EQUITY NEWS:

TECH:

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  Foxconn (HNHPF) - Apple supplier Foxconn reported December sales -26.89% Y/Y; January-December 2023 sales -6.98% Y/Y. Foxconn said Q4 revenue was slower due to flattish market demand. Q1 operations were gradually entering the off-peak season, seasonal performance expected to be similar to that seen over the last three years. It added that the outlook for Q1 is for a Y/Y decline.


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  Samsung Electronics (SSNGY) - Samsung cut its Q1 wafer foundry price quotes by 5-15% to attract customers and fill production. Firms such as UMC, VIS and PSMC may also follow suit, according to Money UDN.


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  OpenAI (not listed) - Microsoft (MSFT)-backed OpenAI OpenAI will open its custom ChatGPT store next week, The Verge reports. The store to share and sell custom AI agents will launch after being delayed for a month.


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  AI stocks - Jeff Bezos backs AI-powered startup Perplexity, which is challenging Google in internet search, WSJ reports. Despite fewer users, it secured record funding. With fewer than 40 employees, the San Francisco-based company's "answer engine" serves around 10mln users monthly.


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  Adobe (ADBE) - Digital Media President David Wadhwani sold 6.1K shares on January 3rd for a total USD 3.49mln.

COMMUNICATIONS:

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  Disney (DIS) - NCAA and ESPN strike an eight-year media rights deal topping USD 115mln yearly, tripling the previous agreement's value. An extra 25% supports production and marketing expenses.

CONSUMER:

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  Costco (COST) - December comparable sales +8.5%, with net sales of USD 26.15bln (+9.9% Y/Y). For the seventeen weeks ending December 31st, it saw net sales +5.9% Y/Y at USD 82.86bln; net sales for the seventeen week period were negatively impacted by approximately 0.5-1ppts from the shift of the fiscal calendar due to the fifty-third week in FY23.


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  McDonald’s (MCD) - McDonald’s CEO said the burger chain was experiencing a "meaningful business impact" in the Middle East due to the war between Israel and Hamas, Bloomberg reports. MCD became the target of boycotts after photos and videos on social media showed franchised stores in Israel giving meals to the nation’s soldiers following the October 7th Hamas attack.


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  BYD (BYDDY) - Chinese automaker BYD has commenced construction on a CNY 10bln sodium-ion battery plant in China's Xuzhou city; the factory has a planned annual capacity of 30 gigawatt-hours.


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  Tesla (TSLA) - China's Market Regulator said the automaker recalls a total of 1.62mln vehicles, including Model S, Model X, and Models 3 and Y.


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  Hyundai Motor (HYMTF), Kia (KIMTF) - Hyundai, Kia, and W. L. Gore & Associates join forces at the Mabuk Eco-Friendly R&D Center in Korea to develop an advanced polymer electrolyte membrane for hydrogen fuel cell systems.


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  Constellation Brands (STZ) - Constellation announced the departure of EVP and President of Wine & Spirits Robert Hanson, effective February 29th. CEO Bill Newlands will take interim charge during the transition as the company seeks a successor.


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  Airbnb (ABNB) - CEO Brian Chesky sold 82.6K shares on January 1st for a total USD 11.1mln.

FINANCIALS:

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  American Tower (AMT), Brookfield Asset Management (BAM) - American Tower reaches deal with Brookfield Asset Management unit for the sale of its Indian operations. The agreement could yield up to approximately USD 2.5bln, subject to pre-closing terms. Expected to conclude in H2 2024.


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  China Stocks - China regulators recently requested that mutual fund managers prioritise the launch of equity funds as authorities seek to bolster its lagging stock market, Reuters reports.


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  Coinbase (COIN) - COO Emilie Choi sold 8K shares on January 2nd for a total USD 1.39mln. Director Marc Andreessen sold 34K shares on January 2nd for a total USD 5.57mln.

HEALTHCARE:

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  Merck & Co (MRK) - CEO said it seeks GLP-1 treatments extending beyond weight loss, aiming to leverage benefits in new areas, Reuters reports. Merck's efinopegdutide demonstrated promising weight-loss effects while being developed for NASH treatment. Drugs like Wegovy, Ozempic, Mounjaro, and Zepbound from competitors are anticipated to generate over USD 100bln in sales.


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  Thermo Fisher (TMO) - Thermo Fisher Scientific halts sales of DNA-based identification products in Tibet, mirroring its previous decision in Xinjiang, WSJ reports. Concerns raised by human-rights groups regarding potential misuse by local authorities led to the move.


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  Definitive Healthcare (DH) - Definitive Healthcare announced restructuring plan to cut costs, aiming for improved margins and growth. Sees 154 job cuts, with estimated charges of USD 6.5-7.2mln in H1 2024, plus a USD 1.5mln non-cash charge.


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  Qiagen (QGEN) - To accelerate investments into QIAGEN Digital Insights bioinformatics business.

ENERGY:

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  ExxonMobil (XOM) - Said changes in gas prices will positively impact Q4 upstream earnings by between USD 0.4-0.8bln vs Q3 levels. Sees change in industry margins to negatively impact Q4 energy products earnings by USD 1.7-1.5bln vs Q3. Said change in industry margins to positively impact Q4 chemical products earnings by USD 0.3- 0.5bln vs Q3, and change in liquids prices to negatively impact Q4 upstream earnings by USD 0.8bln-0.4bln vs Q3. Sees change in unsettled derivatives (mark-to-market) to impact Q4 upstream earnings by negative USD 0.3bln to positive USD 0.1bln vs Q3. Sees change in unsettled derivatives to impact Q4 energy products earnings by positive USD 1-1.4bln vs Q3.

INDUSTRIALS:

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  Maersk (AMKBY) - The cargo shipper said it has rerouted four out of five container vessels that were stuck in the Red Sea back towards the Suez Canal to commence the journey around Africa, to avoid the risk of attack.


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  Lockheed Martin (LMT) - Lockheed was awarded a USD 1.15bln Navy contract modification to provide site activation and hardware requirements, to include site activation events and training devices, as well as contract management, planning and readiness reviews and associated non-recurring introduction to service activities.


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  Sodexo (SDXAY) - Q1 revenue +3.1% Y/Y at EUR 6.29bln supported by higher prices and new contracts; organic revenue growth +8.2%. Affirms FY24 and FY25 targets.

05 Jan 2024 - 09:30- Fixed IncomeData- Source: Newsquawk