US EARLY MORNING: US index futures are a little higher after Monday's encouraging news on the inflation front

US PRE-MARKETS: US index futures are trading a little above neutral following Monday’s gains, which were underpinned by apparent progress on the inflation front, where the Manheim Used Car survey and the NY Fed’s Survey of Consumer Expectations both alluding to cooling near-term price pressures. These data have eased fears going into Wednesday’s CPI release. Treasury yields are lower across the curve, with the long-end outperforming. Fed pricing remains little changed, however, with money markets still assessing that the central bank will lift rates 25bps in July, to between 5.25-5.50%, where rates are expected to peak. The Dollar Index is a little lower, and crude futures are also gaining.

FED, JOBS, GROWTH: Goldman Sachs says that the gap between interest rates and financial conditions in the US can be partly explained by optimism about economic growth. However, current financial conditions also reflect expectations for policy relief, which puts pressure on the Fed to maintain a more cautious approach. GS notes that the central bank has historically been hesitant to ease monetary policy when the job market is strong, but the bank says that upside for rates looks limited – from here, both right and left tail risks could be more capped making the risk/reward on short duration positions less attractive. GS argues that the relaxation of growth expectations in risky assets has increased the risk of disappointment, making short-term calls on gold an attractive option for hedging portfolios. The US economy's strength, along with the Fed's cautious stance and concerns about global growth, has supported a stronger US Dollar, especially against emerging market currencies. The Euro, meanwhile, has remained resilient despite weak economic data, but there may be opportunities for the Euro to weaken if domestic and Chinese growth remain subdued, GS writes.

TODAY’S AGENDA:

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


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  EUROPEAN DAY AHEAD: The German ZEW is expected to slip in July. On the geopolitical front, NATO begins its Summit, which will run over today and tomorrow. On the supply front, Netherlands will sell between EUR 2-2.5bln of 2030 DSLs, while Germany will auction EUR 5bln of 2028 Bobls.


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  US DAY AHEAD: The NFIB small business optimism index, and the weekly RedBook are due in US premarket trade. After the open, the IBD/TIPP economic optimism index will be released, which will provide us with a preview ahead of Friday’s University of Michigan data. On the speakers’ slate, Fed hawk Bullard (non-voter) will deliver remarks on the US Economy and Monetary Policy before the cash equity open. The Fed’s discount rate minutes will also be out in the afternoon. The US will sell USD 40bln of 3yr notes.


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  ENERGY: The EIA’s STEO report is due today. Afterhours, the API will publish its weekly inventory report; this week, analysts expect crude stocks to build 0.2mln, distillates to draw 0.4mln, gasoline to draw 1.3mln.


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  RECAP - US SESSION (MON): Stocks were mostly stable, with small-cap stocks outperforming larger ones. Concerns grew over the NDX index due to an impending rebalancing decision. Positive signs ahead of Wednesday's CPI data included a decrease in used car prices. The NY Fed reported a decrease in consumer inflation expectations for the next year but overlooked an increase in the 5-year gauge. The Treasury curve steepened, the dollar weakened, and oil prices fell due to disappointing Chinese data.


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  RECAP - APAC SESSION (OVERNIGHT): Asian-Pacific stocks mostly rose as they followed positive trends from the US. Encouraging inflation indicators and China's support measures boosted sentiment. Australia's ASX 200 gained due to the tech and mining sectors, supported by improved consumer confidence. Japan's Nikkei 225 remained flat, hindered by a stronger currency. Hong Kong's Hang Seng and China's Shanghai Composite benefited from extended financial policies for the real estate market.


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  EUROPEAN OPEN: European equity indices started Tuesday trade with gains, helped by tailwinds from the US session and overnight APAC trade. Jobs data out of the UK showed a decline in the vacancies-to-unemployment ratio, a drop in the official measure of vacancies, and a stagnant increase in employee numbers, while BRC retail sales ticked higher in June. Final German inflation metrics for June were unrevised.


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  REVIEW - UK JOBS DATA: The UK labour market showed signs of loosening, with the claimant count rising by almost 26k and the jobless rate unexpectedly rising 0.2ppts to 4.0%. Wages still picked up a little, with average weekly earnings +6.9% 3m/YY (exp. 6.8%, prev. 6.5%), and the ex-bonus measure +7.3% (exp. 7.1%, prev. 7.2%). Ahead, Pantheon Macroeconomics says labour market data will continue showing a loosening, with the vacancies-to-unemployment ratio reaching 2019's average level by November. Its economists say that the MPC will likely stop its rate hiking cycle soon due to signs of a loosening labour market and the expectation of reduced wage growth in the future.

EQUITY NEWS:

CONSUMER:

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  Amazon (AMZN), Walmart (WMT) - Amazon's "Prime Day" event will carry deeper discounts including travel deals, Reuters reports, as inflation hits consumers' wallets, but Amazon hopes to boost sales with discounts on items like clothing, headphones, and exercise bikes. Despite slower growth and consumer caution, Amazon could generate between USD 4-6bln in revenue from this year's events, some analysts think. Other retailers like Walmart and Best Buy are also offering competing deals.


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  Toyota Motor (TM) - Downgraded to Equal Weight from Overweight at Morgan Stanley. Morgan Stanley analyst expressed concerns about competition in the EV market, and questioned the strength of the Toyota brand and its suppliers in the EV era, but acknowledge a higher price target due to a weaker yen.


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  PriceSmart (PSMT) - Q3 adj. EPS  1.02 (vs 0.62 Y/Y), Q3 revenue USD 1.1bln (vs 1.03bln Y/Y). Q3 comparable net merchandise sales +5.8%, net merchandise sales +7.1%. Announced a USD 75mln share repurchase programme.

TECH:

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  Microsoft (MSFT) - Microsoft has started another round of layoffs on Monday, according to a Verge reporter. The sales teams are reportedly the most impacted, along with employees in support roles, education, and Microsoft’s Modern Work teams.


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  Apple (AAPL), Qualcomm (QCOM) - Apple's chief operating officer and top corporate lawyer are opposing subpoenas that would require them to answer questions in a securities class action against Qualcomm, Reuters said. The lawsuit alleges that Qualcomm made misrepresentations about its business practices. Apple has not yet commented on the matter.


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  AMD (AMD), IBM (IBM) - AMD has appointed Phil Guido as the new chief commercial officer. Guido brings over 30 years of experience from IBM, where he held various roles including general manager and global managing partner of strategic sales at IBM Consulting.


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  Stratasys (SSYS), Nano Dimension (NNDM), Desktop Metal (DM) - Stratasys is reviewing an increased tender offer from Nano Dimension to acquire its shares. The Stratasys Board will evaluate the offer and inform shareholders of its decision within ten days. Stratasys still intends to proceed with the merger agreement with Desktop Metal.


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  Payoneer Global (PAYO) - Payoneer Global will reduce its workforce by around 9% to enhance productivity and align operations with growth objectives. The plan is expected to result in cost savings of USD20mln annually, and incur charges of approximately USD 5mln.


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  Vedanta (VEDL) - The semiconductor said it was fully committed to its semiconductor fab project, has lined up other partners to set up India’s first foundry following Foxconn's withdrawal from the JV, according to the Economic Times.


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  Uber (UBER) - CFO Nelson Chai plans to leave the company, although the timing is uncertain, Bloomberg reports. Chai played a role in improving Uber's financial performance since joining in 2018, the report added.


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  VMware (VMW) - EVP Jean Brulard sold 17.2K shares on July 7th for a total USD 2.45mln.


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  DocuSign (DOCU) - Field Operations President Stephen Shute sold 100.3K shares on July 6th for a total USD 4.9mln.


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  Zscaler (ZS) - CFO Remo Canessa sold 12.5K shares on July 10th for a total USD 1.82mln.

COMMUNICATIONS:

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  Meta Platforms (META) - Meta plans to label government-affiliated accounts on its new platform Threads, similar to Twitter. The move aims to provide transparency, and the company aspires to label accounts like RT and Xinhua News Agency accordingly.


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  Sega (SGAMY) - Workers at Sega of America have voted to form the first multi-department video game union in the US, Vice reports. Out of 136 valid votes, 91 supported unionisation.

HEALTHCARE:

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  Rite Aid (RAD) - Rite Aid is considering a Chapter 11 bankruptcy filing to address liabilities related to its involvement in opioids, according to sources cited by Reorg.


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  Prothena (PRTA), Bristol Myers Squibb (BMY) - Prothena announced that Bristol Myers Squibb has exercised its option to obtain worldwide commercial rights for PRX005, a potential treatment for Alzheimer's disease. BMY will pay Prothena USD 55mln for the rights. Prothena will continue advancing its portfolio of Alzheimer's disease candidates.


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  Novo Nordisk (NVO) - EMA is investigating Novo Nordisk's diabetes drug Ozempic and weight-loss treatment Saxenda after reports of patients experiencing suicidal thoughts. Novo Nordisk said it is prioritising patient safety, and has not found a causal link between the drugs and self-harming thoughts.


• 
  Iovance Biotherapeutics (IOVA) - Announced a USD150mln stock offering, subject to market and other conditions.

INDUSTRIALS:

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  General Dynamics (GD) - US Security adviser Sulivan said President Biden plans to move forward with the transfer of F-16 jets to Turkey in consultation with Congress.


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  MDU Resources (MDU) - MDU Resources plans to separate its construction services business from the company to focus on energy delivery. Exec said the construction services division has been performing well, with record revenue and a strong backlog. MDU expects more opportunities from infrastructure investments and the US energy transition.


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  ADT (ADT) - ADT expects to incur an impairment charge of USD 145-185mln for its Solar unit, due to current economic conditions and lower-than-expected operating results.


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  Ameresco (AMRC) - Ameresco announces battery energy storage asset contract with United Power.

MATERIALS:

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  WD-40 (WDFC) - Q3 EPS 1.38 (vs 1.07 Y/Y), Q3 revenue USD 141.7mln (vs 123.7mln Y/Y). CEO said results showed a return to solid top-line growth in Q3 after two quarters of flat or declining sales, and the company's global sales showed positive growth on a constant currency basis. Reiterates FY23 EPS outlook for USD 4.80-5.00 (exp. 4.90), and FY23 of USD 535-600mln (exp. 535.1mln).


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  Coherent (COHR) - Said that China's gallium and germanium export restrictions will have minimal to no impact on the company due to ample inventories of these materials at both Coherent and its supply chain partners, and the ability to source the materials outside of China. It added that efficient recycling programmes already exist at both Coherent and its supply chain partners.

ENERGY:

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  Dominion Energy (D), Berkshire Hathaway (BRK.B) - Dominion Energy has sold its remaining stake in Cove Point LNG to Berkshire Hathaway Energy for USD 3.5bln. The proceeds will be used to repay debt, and the transaction is expected to improve Dominion Energy's financial position.

FINANCIALS:

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  KKR (KKR) - KKR is considering options for its 70% stake in NVC Lighting's China business, including a potential sale that could fetch about USD 1bln, BBG reported. A strategic review is ongoing, and no final decision has been made.

REAL ESTATE:

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  Terreno Realty (TRNO) - Q2 occupancy 97.8% (vs 97.9% Y/Y).

11 Jul 2023 - 09:30- Research Sheet- Source: Newsquawk