US EARLY MORNING: US futures are a touch lower, Treasury yields wider, ahead of today's ADP and Services ISM data

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  OVERNIGHT: US stocks were lower Tuesday, with cyclical/value sectors leading the decline after a chunky fall in the number of job openings dimmed the markets' view on the US labour market and growth expectations (see here). Asia-Pac stocks were mixed with sentiment clouded following the negative handover from Wall St, where risk assets were pressured as weak JOLTS data stoked economic growth concerns; APAC trading was also hampered by mass closures across Greater China for Ching Ming Festival (see here). In central bank events, the RBNZ lifted rates by more than expected (see below). European indices open around flat, ahead of UBS AGM, and European officials visit to China; the bloc saw better than expected industrial output data from Germany and France (see here).


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  US PRE-MARKETS: US equity futures are trading slightly below neutral, Treasury yields are wider by 1-4bps, with the short-end once again underperforming, though this does not appear to be giving any broad sway to the Dollar Index, which is sitting around unchanged levels. Ahead, the ADP jobs data will help shape expectations for the more widely followed BLS employment situation report, due Friday; the street looks for a cooling in the headline rate of jobs growth to 200k vs 242k last time out (for reference, Friday's official data is expected to see the headline at 240k vs 311k in February). The data follows the February JOLTs data released on Tuesday, which undershot market expectations, and provided some signs that the tightness in the labour market was alleviating. That said, Pantheon Macroeconomics reminds us that both the JOLTs and ADP data series are both unreliable indicators; it thinks the former still overstates labour market demand relative to the NFIB's survey, while the latter is still has poor predictive power for the official NFP data, even after the ADP's model was rebuilt and relaunched last August. Elsewhere, crude futures are higher, as bullish weekly inventory data for the API saw larger than expected draws for crude and the products, adding to the upside impulse after some OPEC+ members added voluntary cuts over the weekend.

DAY AHEAD:

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


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  EUROPEAN DATA/SPEAKERS: Final S&P Global services PMI data for March are due out of Europe; Eurozone, France and Germany's metrics are expected to be unrevised. Italian retail sales data for February will be released. ECB chief economist Lane will give remarks in the afternoon. On the EM central bank front, Poland's NBP is expected to hold its Base Rate at 6.75%. EU officials' China visit continues (between April 5-7th), our primer for the events can be accessed here.


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  US DATA/SPEAKERS: Ahead of the BLS jobs report due on Good Friday (NOTE: the desk will be running a special service covering the event from 13:00BST/08:00EDT to 13:45BST/08:45EDT on the squawk and headline feed, although only FX markets will be trading amid holiday closures), the ADP will release its gauge of payrolls on Wednesday, where the headline rate is expected to cool to 200k from 242k. Traders will be paying close attention to the ISM Services data, after the manufacturing equivalent drove a dovish reaction as it came in softer than expectations; in terms of the details, the headline is seen moderating to 54.5 from 55.1, but there will also be attention on the sub-indices. Fed's 2024 non-voting member Mester will speak before the market open; on Tuesday, Mester said that the Fed needs to raise rates above 5% and hold there for a while, arguing that inflation remained too high; she added that she does not share the market's outlook for rate cuts this year. Elsewhere, weekly MBA mortgage applications data will be released.


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  SUPPLY: The UK will sell GBP 3.5bln of 2029 debt, while Germany will sell EUR 4bln of a 2029 line.


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  ENERGY: The DoE will release weekly energy inventory data; as a basis of comparison, the API's data is said to have shown Crude stocks -4.3mln bbls (exp. -2.3mln), Cushing inventories -1.0mln bbls, gasoline stocks -4.0mln bbls (exp. -1.7mln), and distillate stocks -3.7mln bbls (exp. -0.4mln). Citi's analysts said the data was bullish across the board.


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  RBNZ REVIEW: New Zealand's central bank hiked rates by 50bps, more than analysts were expecting, lifting its Overnight Cash Rate to 5.25%. Westpac said the move reflects a determination to get to where it thinks it needs to be quickly, though it still appears to be eyeing a peak OCR of 5.5% this year. "The RBNZ is wary of the additional pressures that the cyclone rebuild will place on an economy that is already overheated (though starting to cool off)," Westpac said, adding that it expects a further 25bps increase at the May review; "The RBNZ is likely to retain a tightening bias beyond this, and the balance of risks is towards a peak higher than 5.5%."


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  EUROPEAN INDUSTRIAL OUTPUT REVIEW: Data released today showed German industrial orders rising +4.8% M/M in February, topping expectations of a +0.3% M/M rise; though the prior was revised down to +0.5% from +1.0% initially reported. ING said German industrial orders have rebounded sharply since November, brightening the outlook for German industry, but warned that the US slowdown, the longer-term fallout from recent financial turmoil, the broader impact of monetary policy tightening, could all still act as headwinds for the sector ahead. Meanwhile, data out of France also showed industrial output above expectations, with the headline rising 1.2% M/M (exp. +0.5%), while the prior was revised up to -1.4% from an initially reported -1.9%.

EQUITY NEWS:

HEALTH CARE:

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  Johnson & Johnson (JNJ) - Rose over 3% after hours, after it announced that it will pay USD 8.9bln to resolve current and future talc claims. Subsidiary LTL Management LLC re-filed for voluntary Chapter 11 bankruptcy protection to obtain approval of a reorganisation plan that will resolve all claims arising from cosmetic talc litigation against the Company and its affiliates in North America. The USD 8.9bln represents an increase of USD 6.9bln over the USD 2bln previously committed in connection with LTL's initial bankruptcy filing in October 2021. JNJ said it had secured commitments from over 60,000 current claimants to support a global resolution on these terms. It added that neither LTL's original filing nor this re-filing is an admission of wrongdoing, nor an indication that the Company has changed its longstanding position that its talcum powder products are safe. Analysts said that the announcement will help to alleviate the uncertainty regarding Talc claims, even though the upsized liability cut around 2% from its discount cash value.


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  AstraZeneca (AZN) - Lynparza and Imfinzi combination improved progression-free survival in newly diagnosed patients with advanced ovarian cancer without tumour BRCA mutations in DUO-O Phase III trial.

TECH:

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  AI Names - President Biden told science and technology advisers it remains to be seen whether AI is dangerous, but he underscored that technology companies had a responsibility to ensure their products were safe before making them public, Reuters reports. Biden added that it was also important to address potential risks to society, national security and the economy.


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  Alphabet Inc (GOOGL), Nvidia Corp (NVDA) - Google Tuesday released details about the supercomputers it uses to train its AU models, and said that its systems were both faster and more power-efficient than comparable systems from Nvidia.


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  Apple Inc. (AAPL) - Apple lost a bid to register part of a federal trademark for "Apple Music" on Tuesday after a US appeals court ruled for a jazz musician who challenged the tech giant's application, Reuters reports. The court rejected Apple's argument that it had priority over trumpeter Charlie Bertini's "Apple Jazz" trademark rights based on its ownership of an earlier trademark from the Beatles' music label Apple Corps Ltd.


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  Hon Hai Precision Industry (HNHPF) - Foxconn founder Terry Gou said he would seek the presidential nomination for Taiwan's main opposition party, the Kuomintang (KMT), for a second time, Reuters reports. Elsewhere, Foxconn March sales -21.1% Y/Y, Q1 +3.9% Y/Y; Q2 outlook expects to see a Q/Q and Y/Y decrease.


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  VMware, Inc. (VMW) - CFO Zane Rowe sold 35.7k shares on April 3rd, for a total USD 4.45mln.


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  UK Cloud Market, Alphabet Inc (GOOGL), Microsoft Corporation (MSFT) - Regulator Ofcom is proposing to refer the UK cloud market for investigation; it is reportedly concerned about the practices of Amazon and Microsoft particularly, given their position in the market.

COMMUNICATIONS:

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  Activision Blizzard, Inc. (ATVI), Microsoft Corporation (MSFT) - DoJ is reviewing a proposed settlement to its antitrust lawsuit vs Activision Blizzard over allegedly imposing rules that limited competition and suppressed wages for players in two of its videogame franchises’ professional esports leagues, WSJ reports. The proposed settlement will undergo a period for public comment and be reviewed by the court before it is finalised.

CONSUMER:

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  Walmart Inc. (WMT) - The consumer staples giant slipped in after hours, ahead of its Investment Community Virtual Meeting today; Walmart continues to see Q1 adj. EPS between USD 1.25-1.30 (exp. 1.30), while Q1 revenue growth is seen between 4.5-5.0% in constant currency (exp. 148.4bln). It also reiterated its FY24 adj. EPS guidance at between USD 5.90-6.05 (exp. 6.12), while it continues to see FY24 revenue growth of between 2.5-3.0% in constant currency (exp. 631.8bln), and it sees FY24 US comp sales rising between 2.0-2.5% (exp. +2.8%), excluding fuel. Elsewhere, it said that by FY26, roughly 65% of its stores will be serviced by automation, approximately 55% of the fulfillment centre volume will move through automated facilities, and unit cost averages could improve by approximately 20%. It added that as the changes are implemented, one of the outcomes is roles that require less physical labour but have a higher rate of pay.


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  Amazon.com, Inc. (AMZN) - Amazon laid off more than 100 employees in its video games division, CNBC reports. The layoffs are part of its 9,000 job cuts announced earlier this year. The report added that since the launch of Amazon Games in 2013, it has struggled to produce a hit despite several published projects.


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  Pirelli (PRLLY) - Italy is reportedly reviewing options to limit China's influence over Pirelli, according to Bloomberg.


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  Volkswagen AG (VWAGY) - The automaker’s Czech unit Skoda is to raise wages by 10%.

ENERGY:

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  Energy Inventories - API weekly inventory data reportedly showed headline Crude stocks -4.3mln bbls (exp. -2.3mln), Cushing inventories -1.0mln bbls, gasoline stocks -4.0mln bbls (exp. -1.7mln), and distillate stocks -3.7mln bbls (exp. -0.4mln).


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  Exxon Mobil Corporation (XOM) - Exxon said that changes in liquid prices will negatively impact Q1 upstream earnings by between USD 0.6bln-1.0bln vs Q4 levels, and sees the change in gas prices negatively impacting Q1 upstream earnings by between USD 0.4bln-0.8bln vs Q4 levels. It added that changes in unsettled derivatives will positively impact Q1 energy products earnings by between USD 0.3bln-0.7bln vs Q4 levels.

MATERIALS:

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  Compass Minerals International, Inc. (CMP) - Compass said it has taken the initial steps to align the company's cost structure to its current business needs, and will eliminate 16% of its corporate workforce.


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  Heidelberg Materials (HDELY) - Will reportedly sign an MoU with the Canadian government for a carbon capture facility for cement production, according to Reuters.

INDUSTRIALS:

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  3M Company (MMM) - Judges are reportedly wary of 3M unit’s bid to halt military earplug lawsuits, Law.com reported. US Seventh Circuit Judge David Hamilton questioned if ruling for 3M subsidiary Aearo Technologies would give companies facing multidistrict litigation in the future a way to use the bankruptcy process to get shielded from claims.


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  Leonardo DRS, Inc. (DRS) - Was awarded over USD 1bln to support US Navy submarine programme, to provide the integrated electric propulsion components for the Navy's next-generation Columbia-class submarine.


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  Lockheed Martin Corp. (LMT), Northrop Grumman (NOC), General Atomics Aeronautical Systems Inc - The three were awarded a shared USD 400mln max contract for research and development for the Advanced Aerospace Systems Technology Research programme.

UTILITIES:

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  Iberdrola (IBDRY) - To sell in excess of 8,400 MW of combined cycle gas capacity in Mexico for USD 6bln to Mexico's infrastructure partners.

FINANCIALS:

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  Credit Suisse (CS), UBS (UBS) - BoE approves UBS' takeover of Credit Suisse in the UK. Separately, the banks have received a temporary green light from the EU antitrust regulators for the acquisition, but will still have to request clearance under EU merger rules.

05 Apr 2023 - 09:30- Research Sheet- Source: Newsquawk