US EARLY MORNING: US index futures are a little below neutral in wake of hawkish Powell; ISM, weekly claims ahead; Friday's jobs report comes into focus

NOTE: Daylight saving time in the UK has now ended, and the time differential between London and New York will be four hours this week. Daylight saving will end in the US on Sunday 6th November, upon which the usual five-hour time differential will be restored.

SNAPSHOT: US index are trading slightly beneath neutral after the downside in wake of Fed Chair Powell’s hawkish press conference, where he essentially said that while the Fed will consider the case for slowing rate hikes, it is still committed to tightening policy to manage inflation, while the eventual terminal rate may be higher than envisaged in the September forecasts (we recap the FOMC meeting and press conference below). Yields have continued higher along the Treasury curve, and are higher by 6-12bps, with the pressure most acutely felt along the front-part of the curve. The Dollar Index is garnering some strength, weighing on activity currencies and EMFX, amid the prospect of a higher US terminal rate. Crude futures are negative; while the hawkish impulse of Chair Powell is the overarching factor cited for the market’s tone on Thursday, it is also worth noting economic concerns in China, where the Caixin gauge of services and composite economic activity came in below expectations.

DAY AHEAD: While much of the focus will be on digesting the Fed’s latest policy decisions, it is still a busy docket for other events on Thursday; before the US day gets underway, the Norges Bank and Bank of England are both due to make policy announcements (previews for both are below), with a 50bps and 75bps rate hike expected respectively. The US day will see the release of weekly initial jobless claims data (these do not coincide with the survey week for the NFP jobs data due Friday – our NFP preview can be accessed here). The ISM services report is expected to pare back at the headline level by a point or so, while S&P Global’s final PMI composite and services releases for October are due 15 minutes before the release of the ISM. Factory orders and international trade data are also on the slate. There are quite a few ECB speakers due to make remarks again today, including the seemingly ever-present President Lagarde. Full day ahead schedule can be accessed here. Today’s US corporate earnings include CI, COP, AMGN, SBUX, PYPL; full earnings expectations can be accessed here.

FOMC RECAP: The Federal Funds Rate target was lifted by 75bps to 3.75-4.00%, as expected. The statement was dovishly received by the market, after it stated that the Fed will consider the "cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments" when determining the pace of future rate increases. Analysts rationalised that with rates in restrictive territory, the Fed can downshift to a slower pace of normalisation to assess the impact of the 375bps worth of rate tightening unleashed since March. However, Fed chair Powell's press conference injected a hawkish bias after he suggested that it was “very premature” to consider pausing the course of hiking. The Fed chair said that the time to slow rate hikes might come as soon as the December meeting, he impressed that inflation remains well above the Fed's longer-run goals, with price pressures evident across goods and services. And although longer-term inflation expectations still appear well-anchored, the Fed wants to see inflation coming down decisively, and is prepared to stay the course until the job is done, with the Fed strongly committed to its inflation target of 2%. He added that there was still "some ways to go" on rate hikes, while the 'ultimate rate level' might even be higher than previously expected (NOTE: the Committee forecast a 4.50-4.75% terminal rate in its forecasts). The Fed Chair said the debate on how far to lift rates was the important question, but there was still ground to cover before the Fed can 'meet that test', adding that there is a lot of uncertainty regarding the lagged impact of policy tightening. The press conference left the market with a tone of risk-off, and the market-based expectations for the terminal rate rose, now seeing rates peaking between 5.00-5.25% in May/June 2023 (last week, money markets were expecting rates to peak at 4.75-5.00% in May).

BOE PREVIEW (12:00GMT/08:00EDT): With Y/Y CPI running at an uncomfortably high 10.1% in September and the core metric advancing to 6.5%, policymakers are expected to deliver a “significant” rate hike after the 50bps adjustment in September underwhelmed some in the market. Expectations are for the MPC to hike the Bank Rate by 75bps to 3%, according to 18 /30 analysts surveyed by Reuters. In terms of market pricing, a 75bps hike is 95% priced in as bets for 100bps continue to recede. The decision to hike rates is expected to be unanimous, however, there is expected to be a split in views over the magnitude with Dhingra (voted for a 25bps hike in September) and Tenreyro potential dissenters. Note, the Bank has continued to push back on the aggressive level of market pricing with Deputy Governor Broadbent (20th Oct) noting that it remains to be seen if rates need to rise as much as currently priced in by markets. It’s also worth noting that by the time of the meeting, the Bank’s Gilt sale operation (short and medium-term) will have commenced after pushing back the start date in October. Elsewhere, the accompanying MPR projections will be subject to great uncertainty and potentially of limited use given that they can only factor in stated government policy. Given the fiscal event due on October 31st has now been pushed back to November 17th, the MPC will need to base its forecast on the Energy Price Guarantee being maintained for two years, instead of the shorter timeframe that Chancellor Hunt is expected to officially unveil. For the full Newsquawk preview, please click here.

NORGES PREVIEW (09:00GMT/05:00EDT): Expectations are divided evenly between a 25bp and 50bp hike going into the policy announcement, from the current 2.25%, with market pricing leaning towards the hawkish option at present. A 25bp hike would chime with the explicit guidance provided in September given concerns that the economy is cooling. However, price pressures continue to ramp up with headline and core CPI both surpassing forecasts for September and thus potentially justifying a 50bp increase. Additionally, and somewhat dependent on the magnitude announced in November, we look for any potential inferences within the statement as to how much tightening to expect next month; reminder, September’s guidance implied 25bp at both the November and December meetings. Note, as this is an interim gathering there will not be a fresh set of forecasts, but we will still receive written guidance from the Bank and Governor Bach will host a press conference at 09:30GMT. For the full Newsquawk preview, please click here.

TECH:

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  Qualcomm Inc (QCOM) - Q4 adj. EPS 3.13 (exp. 3.13), Q4 revenue USD 11.4bln (exp. 11.37bln); Q4 QCT revenue USD 9.90bln (exp. 9.78bln), Q4 QTL revenue USD 1.44bln (exp. 1.56bln), Q4 Internet of Things revenue USD 1.92bln (exp. 1.79bln), Q4 Handsets revenue USD 6.57bln (exp. 6.54bln). Q1 revenue and EPS guidance misses expectations: sees Q1 adj. EPS at USD 2.25-2.45 (exp. 3.40), sees Q1 revenue between USD 9.2-10bln (exp. 12.03bln), sees Q1 QCT revenue between USD 7.7-8.3bln (exp. 10.14bln), sees Q1 QTL revenue between USD 1.45- 1.65bln (exp. 1.71bln).


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  Qorvo, Inc. (QRVO) - Q2 EPS 2.66 (exp. 2.57), Q2 revenue USD 1.16bln (exp. 1.14bln). Exec said it was continuing to adjust to weakening end-market demand while taking steps to significantly reduce inventory in the channel; is encouraged by customer design win activity and content and integration trends. Sees Q3 EPS between 0.50-0.75 (exp. 1.69), and sees Q3 revenue between USD 700-750mln (exp. 989mln). Announces USD 2bln share repurchase programme. Qorvo, SK Siltron CSS enter SiC supply agreement.


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  MKS Instruments, Inc. (MKSI) - Q3 EPS 2.74 (exp. 2.30), Q3 revenue USD 954mln (exp. 946.7mln). Exec said that end market demand in Semiconductor and Advanced Electronics markets is expected to soften in Q4 and into 2023. Q4 EPS seen at 1.34 +/- 0.27 (exp. 2.26), while Q4 revenue seen at USD 1bln +/- USD 50mln (exp. 1.1bln).


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  Robinhood (HOOD) - Q3 EPS 0.20, Q3 revenue 361mln (exp. 357.8mln), Q3 MAUs 12.2mln (exp. 13.7mln), Q3 ARPU 63 (exp. 62.58).


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  Coinbase (COIN) - Chief product officer Chatterjee to step down.


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  Cognizant Technology Solutions Corporation (CTSH) - Q3 adj. EPS 1.17 (exp. 1.16), Q3 revenue USD 4.9bln (exp. 5bln). Sees Q4 revenue between USD 4.72-4.77bln (exp. 5.04bln). Lowers FY22 adj. EPS outlook to 4.43-4.46 (exp. 4.53, prev. range 4.51-4.57), lowers FY22 revenue view USD 19.3bln (prev. range 19.7-19.9bln, exp. 19.8bln).


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  Qualys, Inc. (QLYS) - Q3 adj. EPS 0.94 (exp. 0.86), Q3 revenue USD 125.6mln (exp. 124.9mln). Raises FY22 adj. EPS outlook to 3.60-3.62 (exp. 3.50, prev. range 3.50-3.55), and raises FY22 revenue outlook to USD 488.6-489.6mln (exp. 488.9mln, prev. range 488.0-489.5mln).


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  Fortinet, Inc. (FTNT) - Q3 adj. EPS 0.33 (exp. 0.27), Q3 revenue USD 1.15bln (exp. 1.12bln). Q4 adj. EPS seen between 0.38-0.40 (exp. 0.35), Q4 revenue seen between USD 1.275-1.315bln (exp. 1.27bln); sees FY22 adj. EPS between 1.13-1.15 (exp. 1.05), and sees FY22 revenue between USD 4.41-4.45bln (exp. 4.38bln).


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  HubSpot, Inc. (HUBS) - Q3 adj. EPS 0.73 (exp. 0.51), Q3 revenue USD 444mln (exp. 425.3mln). Q4 adj. EPS seen between 0.82-0.84 (exp. 0.79), and sees Q4 revenue between USD 444-446mln (exp. 449.5mln); lifts FY22 EPS outlook to 2.48-2.50 from 2.28-2.30 (exp. 2.27), and lifts FY22 revenue outlook to USD 1.705B-1.707bln (exp. 1.7bln, prev. range 1.69-1.695bln).

COMMUNICATIONS:

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  Meta Platforms (META) - Meta is to introduce gifts on Instagram, starting with reels and expanding types of digital collectibles that can be showcased on Instagram to include video, while it is adding support for Solana blockchain and Phantom wallet. Is also launching professional mode for Facebook profiles.


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  Roku, Inc. (ROKU) - Q3 EPS -0.88 (exp. -1.28), Q3 revenue USD 761.4mln (exp. 694mln). Added 2.3mln Active Accounts in the quarter, streaming hours increased +90% Y/Y, platform revenue +15% Y/Y (lower than historical growth rates), advertising spend on its platform continues to grow more slowly than beginning-of-year forecast due to current weakness in the overall TV ad market and the ad scatter market in particular, but exec said long-term opportunity in TV streaming remains intact. Sees Q4 revenue at USD 800mln (exp. 895.2mln). Expects macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market; expects these conditions to be temporary, but notes difficulties in forecasts. Anticipate Q4 Player revenue and Platform revenue to be lower Y/Y. Said significant Q3 OpEx Y/Y growth was largely the result of robust hiring in late 2021 and early 2022, has started taking steps to significantly slow the rate of hiring and other OpEx growth in late Q2.


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  Zillow Group, Inc. (ZG) - Q3 revenue USD 483mln (exp. 456.1mln). Exec said occupancy rates continued to drift lower from the historically high levels of the past couple of years, which increased overall rental industry demand for advertising. Traffic to Zillow Group's mobile apps and websites in Q3 +4% Y/Y at 236mln average monthly unique users; Q3 visits +4% Y/Y at 2.8bln. Cash and investments of USD 3.5bln at the end of Q3 were flat vs Q2. Sees Q4 revenue between 395-425mln (exp. 433mln).


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  Vimeo, Inc. (VMEO) - Q3 EPS -0.13 (exp. -0.17), Q3 revenue USD 108.1mln (exp. 106.2mln). Now has around 1.6mln subscribers, with 9,500 paying sales-assisted customers. Sees 2022 revenue growth near 10% Y/Y.


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  Twitter - Elon Musk plans to begin verification sale as soon as Monday, Bloomberg reports. Also reports that Musk plans to eliminate half of Twitter jobs in a cost cutting drive. Elsewhere, L'Oreal (OR FP) denies reports that it has suspended ad spending on Twitter.


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  Lumen Technologies, Inc. (LUMN) - Q3 adj. EPS 0.14 (exp. 0.37), Q3 revenue USD 4.39bln (exp. 4.41bln). To sell EMEA business to Colt for USD 1.8bln. Sees FY22 adj. EBITDA between USD 6.9-7.1bln, and FY22 FCF between USD 2.2-2.4bln. Is eliminating its dividend, but announces USD 1.5bln share repurchase programme over two years.


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  Altice USA, Inc. (ATUS) - Q3 EPS 0.19 (exp. 0.35), Q3 revenue USD 2.39bln (exp. 2.5bln). Total unique Residential customer relationships -2.8% Y/Y in Q3, Unique Residential customer net losses in the quarter were 50k (vs 25k Y/Y). Backs FY22 capex guidance.

CONSUMER:

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  eBay Inc (EBAY) - Q3 adj. EPS 1.00 (exp. 0.93), Q3 revenue USD 2.38bln (exp. 2.32bln); Q3 GMV fell 11% on as-reported basis and fell 5% on an FX-neutral basis to USD 17.7bln. Sees Q4 adj. EPS USD 1.03-1.09 (exp. 1.06), and sees Q4 revenue 2.42bln-2.50bln (exp. 2.49bln).


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  Booking Holdings Inc (BKNG) - Q3 adj. EPS 53.03 (exp. 49.85), Q3 revenue USD 6.05bln (exp. 5.92bln). Exec said it saw an improvement in room night trends as it moved through the quarter, accommodation ADR growth continued to be strong. Despite the rising concern around the macroeconomic environment, it is encouraged by the slight improvement in room night growth seen in October, and by the level of bookings for travel in early 2023. Q3 gross travel bookings +36% Y/Y at 32.1bln (exp. 30.74bln), Q3 room nights booked +31% Y/Y at 240mln (exp. 2369mln), Q3 gross merchant bookings +65% Y/Y at USD 14.51bln (exp. 13.04bln), Q3 adj. EBITDA 2.66bln (exp. 2.64bln).


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  ETSY Inc (ETSY) - Q3 revenue USD 594.5mln (exp. 564.49mln); Q3 gross merchandise sales USD 3.00bln (exp. 2.92bln); Q3 active sellers 7.40mln (exp. 7.8mln), Q3 active buyers 94.15mln (exp. 95.5mln). Sees Q4 revenue between USD 700-780mln (exp. 745mln).


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  Zalando (ZLNDY) - Europe's biggest online fashion retailer reported Q3 revenue EUR 2.35bln (exp. 3.18bln), adj. EBIT EUR 135mln (exp. 162mln). Sees FY Revenue and adj. EBIT at lower end of target range.


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  Hugo Boss (BOSSY) - Q3 sales EUR 933mln (prev. 755mln), EBIT EUR 92mln (prev. 85mln). Upgrades FY22 outlook.


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  MGM Resorts International (MGM) - Q3 adj. EPS -1.39 (exp. 0.23); EPS missed due to large non-cash amortisation charge. Q3 revenue USD 3.42bln (exp. 3.24bln). Exec said the outlook was promising, noting strong bookings into 2023 in domestic operations.


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  BMW (BMWYY) - Q3 revenue EUR 37.2bln (exp. 35.4bln), EBIT EUR 3.7bln (exp. 3.5bln), net EUR 3.2bln (exp. 2.4bln). Confirms FY EBIT margin outlook within the auto segment. Does not expect energy supply shortages to disrupt FY production; expects FY deliveries to be slightly lower Y/Y, though EV sales should double.

CONSUMER STAPLES:

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  Danone (DANOY) - US FDA said some of the Danone's infant milk products will be sold at major retailers in the nation.

MATERIALS:

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  Albemarle Corporation (ALB) - Q3 adj. EPS 7.50 (exp. 6.99), Q3 revenue USD 2.1bln (exp. 2.25bln). Exec noted strong demand for lithium-ion batteries in the quarter, said it is well positioned to enable the global energy transition, on track to more than double lithium conversion capacity vs last year. Narrows FY22 adj. EPS outlook to 19.75-21.75 (exp. 21.28, prev. guidance range was 19.25-22.25), and narrows its FY22 revenue outlook to USD 7.1-7.4bln (exp. 7.5bln, prev. guidance range was 7.1-7.5bln).


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  CF Industries Holdings, Inc. (CF) - Q3 EPS 2.18 (exp. 3.33), Q3 revenue USD 2.32bln (exp. 2.4bln). Exec said that the conditions that supported nitrogen prices for the last year (reduced global supply availability from lower operating rates due to high energy costs for marginal production in Europe and Asia) show no signs of abating, and it expects the global nitrogen supply-demand balance to remain tight with attractive margin opportunities for low-cost producers further into the future.


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  Nutrien Ltd. (NTR) - Q3 EPS 2.51 (exp. 3.97), Q3 revenue USD 8.19bln (exp. 8.7bln). Said it saw record earnings in 2022 due to the strength of agriculture fundamentals, higher fertiliser prices and excellent retail performance. Saw a temporary reduction in potash purchasing in North America and Brazil in the quarter, which impacted sales volumes and realised prices in H2. Underlying demand drivers remain strong, global fertiliser supply challenges still persist, creating a supportive environment for Nutrien.


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  HeidelbergCement (HDELY) - Q3 revenue EUR 5.8bln (exp. 5.68bln). Said demand for building materials is weakening slightly. Significant higher energy and material prices could only be partially offset. Continues to expect a strong FY22 revenue increase Y/Y.

INDUSTRIALS:

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  Ingersoll-Rand Plc (IR) - Q3 adj. EPS 0.62 (exp. 0.59), Q3 revenue USD 1.52bln (exp. 1.45bln). Reiterates FY22 total revenue outlook for growth of 11-13%, raises FY22 organic revenue growth range expectation by 100bps to 12-14%, raised adj. EBITDA guidance to a range of USD 1.4-1.425bln despite an incremental USD 20mln of expected FX headwinds vs prior guidance.


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  Rolls-Royce (RYCEY) - Trading update notes continued recovery, record order intake in Power Systems, large engine flying hours at 65% of 2019 levels in the four months to the end of October and up 36% year to date. FY22 guidance unchanged with a focus on operational and contractual discipline in an inflationary environment.

ENERGY:

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  UK Energy Names - PM Sunak and Chancellor Hunt plan to extend windfall taxes on energy names, will generate an extra GBP 40bln of fiscal revenues over five-years. Reportedly intend to increase the windfall tax rate from 25% to 30% and extend the levy until 2028.

REAL ESTATE:

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  Equinix Inc (EQIX) - Q3 EPS 2.30 (exp. 1.78), Q3 revenue USD 1.84bln (exp. 1.84bln). Sees Q4 revenue USD 1.85bln-1.87bln (exp. 1.88bln). Revises FY adjusted EBITDA view to 3.35bln-3.37bln from 3.32bln-3.35bln (exp. 3.34bln). Revises FY revenue view to 7.24bln-7.26bln from 7.26bln-7.30bln (exp. 7.27bln).

FINANCIALS:

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  Morgan Stanley (MS) - Reportedly plans to begin layoffs in the coming weeks as deal making slows, according to Reuters citing sources. Planned job cuts in APAC will mainly affect teams that focus on China-related business, sources say.


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  MetLife Inc (MET) - Q3 adj. EPS 1.21 (exp. 1.17), Q3 revenue USD 22.27bln (exp. 20.58bln), Q3 book value -5% Y/Y.


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  BNP Paribas (BNPQY) - Q3 revenue EUR 12.3bln (exp. 12.0bln), net income EUR 2.8bln (exp. 2.3bln). Global banking revenue was impacted by markdowns of unsold positions in leveraged financing, -7.9% Y/Y.


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  ING (ING) - Q3 net EUR 0.97bln (exp. 1.16bln), Net Interest Income EUR 3.3bln (exp. 3.2bln), revenue EUR 4.4bln (exp. 4.5bln), CET1 14.7% (exp. 14.8%). Share buyback programme for up to EUR 1.5bln, designed to reduce share capital of the bank will commence on November 3rd, conclude by end-2022.


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  Allstate Corporation (ALL) - Q3 adj. EPS -1.56 (exp. -1.52), Q3 revenue USD 13.2bln (exp. 12bln).


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  Lincoln National Corporation (LNC) - Q3 adj. EPS -10.23 (exp. 1.64), includes net unfavourable items of USD 2bln, or 11.62/shr, due to the annual review of DAC and reserve assumptions. Q3 revenue USD 4.8bln (exp. 4.4bln).

HEALTH CARE:

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  GSK (GSK) - IDMC recommends Gepotidacin early efficacy stop. The pharma intends to submit a new drug application for Gepotidacin to the FDA in H1-2023.

03 Nov 2022 - 08:30- Research Sheet- Source: Newsquawk