US EARLY MORNING: US futures are higher after the Friday sell-off

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  OVERNIGHT: Stocks on Wall Street Friday were hit after further hot inflation data saw a hawkish shift to Fed pricing (see here). Asia-Pac stocks began the week cautiously heading into month-end, and a slew of upcoming releases including Chinese PMI data (see here). BoJ Governor nominees Ueda has again been speaking to lawmakers, and is impressing that the current brand of loose monetary policy outweighs the costs. The European day started out with gains, with geopolitics and Brexit in focus ahead of flash inflation data for the bloc later in the week, as well as ECB meeting minutes (see here).


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  US PRE-MARKETS: US equity futures are starting the week with modest gains, following Friday's downside induced by hot US inflation data which lent to further hawkish repricing of Fed rate hike trajectory expectations. Treasury yields are mixed, but not too far off neutral. The USD is flat; Barclays said its month-end model implies USD moderate buying demand across the board. Crude futures are a little better than flat; Goldman has told its clients that it assumes the China demand boom and flat non-OPEC supply will push the market in deficit from June onwards, and lead OPEC to announce a reversal of its production cut at the June meeting, though there are still risks of flat OPEC output in H2. The slate for today is benign, but later in the week traders will be watching ISM data, as well as European inflation releases and ECB meeting minutes.


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  VALUE VS GROWTH: JPMorgan has reiterated to its clients that the Value gains over Growth will be much lower this year. "This is partly driven by our view from October that inflation has peaked, and that bond yields in the US are set to stall/move lower, in particular in 2H of this year," given that the relative Value vs Growth factor performance is sensitive to bond yields movement. The bank also sees risks of a rollover in activity momentum into the middle of the year. "Even if activity does not show a clear slowing, the setup for Value style might not be all that great going forward," JPM says, "in the case that activity stays resilient, and inflation consequently proves sticky, central banks are then unlikely to go on a pause/pivot, and could keep hiking," which would mean that the yield curve stays inverted, potentially even deepening its inversion. The bank explains that the Value factor needs a steepening yield curve to work. "Our core view is that in 2H market will be moving back to the recession trade, but even in the opposite scenario, Value might not be the best place to be." The bank is currently neutral on Value vs Growth, and says the most likely next move in the coming months will be to go outright underweight Value vs Growth, but adds that in the longer term, there is still 'value' is still in Value style, and so this would be a tactical, 6-12 months call. "Big picture, at the overall market level, we continue to believe that Q1 will mark the high point for the index levels this year, as the fundamental uplift does not come in Q2/Q3, post the relief in activity that is seen in Q1," it writes, adding that it "suggests that one should be turning more defensive as we move to quarter end."

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: There will be attention on the Eurozone consumer inflation expectations numbers; recent reports have noted that Eurozone underlying inflation rose to a record in January, according to the revised data releases, which will likely embolden the ECB’s hawks to push for a 50bps hike in March. Sentiment indicators are out in the morning; final consumer confidence is expected to be confirmed at -19.0 in February; and on the business side, economic, services and industrial sentiment is seen improving in the month. On the speakers front, BoE Chief Economist Pill and BoE’s Broadbent will speak at the annual BEAR Research Conference, while ECB’s Chief Economist Lane will speak speaking on macro-financial stability, and will release a slide deck.


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  NORTH AMERICAN DATA/SPEAKERS: There is not a lot of A-List releases on the slate for Monday’s session: Durable Goods orders for January, and Pending Homes Sales are the highlights; Dallas Fed’s regional survey will also be out. From Canada, current account data for Q4 is due. Fed’s Jefferson (voter) will speak on inflation and the Fed's mandate, and will likely reiterate remarks from last week that wage growth was still running too high, and the ongoing imbalance between supply/demand for labour suggests high inflation may come down only slowly.


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  SUPPLY: The Eurozone will sell EUR 4bln of 2025 and 2028 NGEU notes. The BoE will conduct its long-term Gilt sale in the afternoon.


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  CORPORATE EARNINGS: Today’s major US corporate earnings include OXY; our daily earnings expectations sheet can be accessed here; our weekly earnings sheet can be accessed here – this week’s major earnings include TGT and MNST on Tuesday; LOW and CRM on Wednesday; AVGO and COST on Thursday.


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  WEEK AHEAD: While the week starts off on a quiet note, for scheduled data releases and speakers, the week ahead contains the US ISM, BoJ Governor nominee hearing, China PMI data, EZ flash inflation, as well as ECB minutes; our week ahead preview note can be accessed here.

STOCK SPECIFIC NEWS:

HEALTH CARE:

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  Seagen Inc (SGEN), Pfizer Inc. (PFE) - Pfizer is in talks to acquire Seagen in a deal likely to be valued at more than USD 30bln, WSJ reports. Talks are at an early stage, and there is no guarantee there will be a deal; a number of hurdles would need to be overcome, including a potential antitrust review. Seagen was in talks last year to be acquired by Merck, in a deal that would have been worth USD 40bln+, WSJ reminds us, but the two sides failed to reach agreement.


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  Pharmacy - The Biden administration proposed tighter limits on the online prescription of some medications, a partial reversal of policy changes made during the coronavirus pandemic, NYT reports. The new regulations would require health care providers to have at least one in-person visit with patients before prescribing or refilling certain drugs, would take effect after the public health emergency for Covid ends on May 11th.

FINANCIALS:

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  Berkshire Hathaway Inc. (BRK.B) - The financial conglomerate reported investment losses of USD 22.8bln in 2022, as FX losses and rising rates weighed on earnings in Q4. Net earnings in Q4 -54% Y/Y at USD 18.16bln, Q4 EPS USD 12,412 (vs 26,690 Y/Y), which reflected a sharp drop in investment and derivative gains (-65% Y/Y to USD 11.46bln in 2022). Operating earnings -7.9% to USD 6.71bln. But chief Warren Buffet said the figure was "100% misleading" since the figures include gains and losses on investments that Berkshire has not yet sold, and said investors should focus on the overall health of the company; Berkshire reported record annual operating profits of USD 30.8bln. Spent USD 2.6bln in share repurchases in Q4; Buffett defended its stock buybacks, stating that "when you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue." Berkshire's cash levels stood at USD 128.6bln at year-end after it sold around USD 16.3bln of stocks in Q4. Meanwhile, Q4 insurance underwriting operating net profit -34% Y/Y at USD 244mln. Q4 insurance-investment income USD 2.0bln (vs 1.2bln Y/Y), Q4 earnings from utilities and energy USD 739mln (vs 598mln Y/Y), Q4 railroad earnings USD 1.47bln (vs 1.69bln Y/Y).


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  Citigroup Inc. (C) - Citigroup EMEA M&A Alison Harding-Jones will depart the bank at the end of next month, FT reports, adding that the departure comes as a slowdown in dealmaking activity hits investment banks around the world.


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  Goldman Sachs Group Inc. (GS) - CEO David Solomon faces a reality check from investors on Tuesday as he presents plans to reach key financial goals, Reuters reports. At only the second investor day in Goldman's 154-year history, shareholders will gather to assess the Wall Street giant's roadmap after the high-profile flop of its consumer business, Marcus.


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  Standard Chartered PLC (SCBFY), Credit Suisse Group AG (CS) - Standard Chartered is in talks to support the leveraged-finance business of Credit Suisse' investment-banking spinoff, Bloomberg reports, and is discussing partnering with CS by providing lending capacity. Standard Chartered wouldn’t invest in the new entity as part of any proposed transaction, the report added.


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  HSBC Holdings PLC (HSBC) - HSBC is looking for a new London office that is less than half the size of its skyscraper at Canary Wharf, as the enduring shift towards flexible working takes its toll on the capital’s office market, The Times reports.


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  JPMorgan Chase & Co. (JPM) - Files For mixed shelf up to USD 100bln, according to an SEC filing.


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  PayPal Holdings, Inc. (PYPL) - Recommends stockholders reject mini-tender offer by TRC Capital Corporation.


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  Lincoln National Corporation (LNC) - Files for mixed securities shelf, size not disclosed, according to an SEC filing.

CONSUMER CYCLICAL:

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  Amazon.com Inc. (AMZN) - Amazon is expanding its ultrafast delivery options, WSJ reports, a sign that it remains committed to pushing its logistics system for speed as it scales back plans in other areas. Amazon continues to devote resources to facilities and services structured to deliver packages to customers in less than a day.


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  Automakers - US new vehicle sales are expected to rise in February, but the decision by General Motors to cut truck production at points to new challenges for Detroit's automakers, Reuters reports. Cox Automotive says Detroit pickup truck brands are sitting on growing inventories of unsold vehicles, and as supply-chain bottlenecks ease, the resolve among automakers to keep inventories tighter than pre-pandemic will be tested, and they may have to choose between reducing output to avoid price cuts, or offering richer discounts to pump up sales volumes.


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  Tesla, Inc. (TSLA) - Ross Gerber plans to withdraw a long-shot effort to run for a position on the company’s board, according to Bloomberg, which adds that Tesla representatives have agreed to meet with Gerber next week around Tesla’s March 1st investor day to discuss his concerns about the EV maker’s governance.


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  Travel & Leisure - US travel spending was +3% vs 2019 levels, and +7% vs 2021 levels in December at USD 97bln, US Travel Association said. But analysts say fears of recession and the impact of high inflation could curb a rebound in travel demand seen in Q4, despite bookings so far holding up this year, analysts cited by Reuters said.


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  China - Large US companies are increasing bets on China’s consumers in anticipation of a postpandemic rebound for the world’s second-biggest economy, WSJ reports. Fast food providers McDonalds and Starbucks are opening hundreds of new restaurants, retailers Ralph Lauren and Tapestry are launching new stores, while food companies like Tyson Foods and Hormel are opening new facilities.


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  eBay Inc. (EBAY) - Files for mixed securities shelf, size not disclosed, according to an SEC filing.

CONSUMER DISCRETIONARY:

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  British American Tobacco PLC (BTI) - Positive mention in Barron's, said British American Tobacco was a sleeping giant that may be about to wake up, and as it releases new products, the stock could soar 25%.


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  Walmart Inc. (WMT) - US OSHA regulators said Walmart must pay about UDS 11,000 in fines for failing to prevent heavy boxes from falling 40 feet and seriously injuring an employee at a New York warehouse, Reuters reports, rejecting Walmart's challenge to a penalty the agency levied in response to the 2017 incident.

INDUSTRIALS:

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  Union Pacific Corporation (UNP) - Union Pacific will replace its CEO Lance Fritz this year, and it has hired a consultancy to help aid its efforts to find a replacement, FT reports. The board had formed a task force focused on succession last November. FT added that the announcement came shortly after Soroban Capital Partners warned that the freight rail operator was lagging behind rivals, and needed new management to urgently fix problems at the company.


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  American Airlines Group Inc. (AAL) - Files for mixed securities shelf, size not disclosed, according to an SEC filing.


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  J.B. Hunt Transport Services, Inc. (JBHT) - Files for mixed securities shelf, size not disclosed, according to an SEC filing.

ENERGY:

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  Pioneer Natural Resources Company (PXD), Range Resources Corporation (RRC) - Pioneer rejected a Bloomberg report which suggested that it was mulling an offer for Range Resources, stating that it was not contemplating any significant business combination or other acquisition transactions.


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  Clean Energy - Clean energy names are attracting billions in investments, Barron's notes, identifying the following five stocks as the key players, noting that they have found true niches or have a head start in specific areas: Corning (GLW), Enphase Energy (ENPH), Freyr (FREY), Neste (NTOIY), Schneider Electric (SBGSY).

MATERIALS:

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  Steelmakers - China city of Tangshan has imposed steel production restrictions to try to clear its skies ahead of some major political meetings in the country, Bloomberg reports. A so-called level-two emergency response began on Sunday.

UTILITIES:

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  FirstEnergy Corp. (FE) - Positive mention in Barron's, said the stock is a buy, and will thrive as America goes electric.

COMMUNICATIONS:

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  Manchester United plc (MANU) - The world's most iconic football club Manchester United vanquished Saudi-owned Newcastle United on Sunday in the League Cup Final at Wembley, ending a six-year trophy drought. The Manchester club's maligned US owners, the Glazer family, are currently soliciting bids to sell the club, but the Telegraph has reported that bids received so far may not be high enough to convince them to sell; markets currently value the club at around GBP 3.75bln, but the Glazers are understood to want more than GBP 5bln. Qatari Sheikh Jassim bin Hamad Al Thani and Sir Jim Ratcliffe’s Ineos Group are the only two parties to have gone public with their attempts to buy Man U, Telegraph said, both bids are awaiting more information from Raine Group, who are handling the interest, and it is possible they could be granted access to more detailed financial information on the club this week.


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  Meta Platforms, Inc. (META) - CEO Zuckerberg said Meta has trained and will release a new large language model to researchers, CNBC reported. Meta’s release of its new model comes as large tech companies and well-capitalized startups alike race to tout advances in AI techniques and integrate the technology into commercial products.


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  Warner Bros. Discovery, Inc. (WBD), Paramount Global (PARA) - Warner is suing Paramount over the streaming rights for "South Park", and is seeking hundreds of millions of dollars for an alleged breach of contract for the exclusive rights to the show, CNBC reports. Paramount said the claims were without merit, and believes it is still adhering to its contract. Warner agreed in 2019 to pay more than USD 500mln to license South Park.


• Warner Bros. Discovery, Inc. (WBD) - Warner is informing the professional-sports teams whose games are carried on three of its regional sports networks (RSN) that it wishes to cease operating the channels and exit the business, WSJ reports. The three RSNs were inherited by Warner when it acquired control of the WarnerMedia assets from AT&T Inc. Warner warned that "the business will not have sufficient cash to pay the upcoming rights fees," and that it would not fund shortfalls.


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  Twitter (not listed) - Twitter on Saturday laid off at least 200 of its employees, or about 10% of the roughly 2,000 who were still working for the company, NYT reports. Elon Musk, who acquired the social media platform in October, has steadily pared back its work force from about 7,500 employees as he has sought to reduce costs.

TECH:

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  Microsoft Corporation (MSFT) - Microsoft unveiled two AI-powered services designed to manage telecom networks, drawing on the same capabilities used to manage the tech giant's Azure cloud platform, Reuters reports.


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  Cisco Systems, Inc. (CSCO), Mercedes-Benz Group (MBG) - Cisco is working with Mercedes-Benz to provide an optimal mobile office experience in its new Mercedes-Benz E Class vehicles, it unveiled at Mobile World Congress.


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  Cvent Holding Corp. (CVT), Blackstone Group L.P. (BX) - Events software vendor Cvent has rejected a USD 3.9bln acquisition offer from Blackstone, Reuters reports citing sources. Blackstone is reportedly now taking a break from the negotiations after having its USD 8/shr offer rebuffed.

REAL ESTATE:

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  Veris Residential, Inc. (VRE) - Files for mixed securities shelf up to USD 2bln.

27 Feb 2023 - 09:31- Research Sheet- Source: Newsquawk