US EARLY MORNING: US index futures are flat ahead of the key jobs data

SNAPSHOT: US equity futures are around flat ahead of the August jobs report, which is expected to show a resumption in the cooling rate of payroll additions, though wages are still likely to rise, keeping the Fed in the lane to raise rates by 75bps at its September 21st meeting. Below, we recap some of the nuances we’ll be looking out for in today’s jobs report (our full preview can be accessed here). Treasury yields are lower by 1-2bps, with the short-end seeing the most support. The Dollar Index is giving back some of the gains, which this week saw it rise to fresh highs. Other than the jobs data, traders will be keeping an ear on G7 finance ministers, who will today discuss the Russian oil price cap. Our full Day Ahead can be accessed here. 

US JOBS REPORT PREVIEW:

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  PAYROLLS HEADLINE: The rate of payrolls growth is expected to resume cooling in August, following a blowout month in July. 300k is the consensus, which would be under the previous (528k) and recent averages (3m avg 437k, 6m avg 465k, 12m avg 512k). White House officials have already guided us towards a 'cooler' rate this week, and Fed officials have recently welcomed the cooling of the headline rate. This theme has seemingly been confirmed by the ADP's new National Employment Report, which reported 132k private payrolls were added in August, undershooting the consensus 288k (NOTE: this is a new data series, so some analysts are sceptical about overreading into it).


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  SEASONAL FACTORS: Another thing to note is potential seasonal factors; Goldman Sachs says August seasonals have evolved favourably in recent years, and its forecast of +350k nonfarm payrolls assumes positive residual seasonality worth roughly +150k, which compares to a seasonality headwind of around 100k in the previous report.


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  UNEMPLOYMENT RATE SEEN STEADY: The jobless rate is expected to hold steady at 3.5% (it was 3.46% unrounded, leaving some risks of a move lower to 3.4%). There will be focus on the rate of participation after a decline of one-tenth last month to 62.1%, which likely contributed to the unemployment rate falling; for reference, participation remains off the 63.4% seen pre-pandemic.


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  WAGE GROWTH IS KEY: Average hourly earnings metrics will help gauge how surging consumer prices are translating into second-round effects; the consensus looks for average hourly earnings of +0.4% M/M in August, easing from the +0.5% pace in July, but the annual rate is still expected to climb by one-tenth of a percentage point to 5.3% Y/Y; the ADP’s revamped National Employment Report said that the median change in annual pay was running at a rate of +7.6% Y/Y for job-stayers, and +16.1% Y/Y for those who had switched jobs – those rates are higher than the current level of average hourly earnings in July, as well as both the rate of July's headline (6.3% Y/Y) and core PCE prices measure (4.6% Y/Y), the Fed’s preferred gauges of inflation.


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  POLICY IMPLICATIONS: The Fed has said that its policy on rate changes is data-dependent. Traders understand this to mean that if the headline (which alludes to growth conditions) is favourable, and wages metrics (an indication of price pressures) continue higher, it would result in the Fed being more aggressive with short-term policy, although many also note that the Fed seems willing to sacrifice growth even if it is not holding up as well, as it tries to manage inflation. The August jobs data will be the last that the Fed sees before the September confab, but there is still the US CPI report, due September 13th, that could influence officials’ view; indeed, Fed’s Mester, who votes on policy this year, said she’d be basing her decision on the inflation data, not the jobs report. That could mean that any market reaction to the data would be subject to revision based on the incoming CPI metrics. That said, the average hourly earnings measures will still provide some insight on how inflation dynamics are feeding through into second-round effects.


• Our full preview can be accessed here.
  

EQUITY NEWS:

CONSUMER CYCLICAL:

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  Amazon.com, Inc. (AMZN) - A union victory at Amazon’s Staten Island warehouse should be upheld, a National Labour Relations Board official said, after more than 2,600 workers at the JFK8 warehouse in April voted to join the Amazon Labour Union, CNBC reports. Amazon had sought to overturn the election accusing the NLRB's Brooklyn office of violating labour laws by appearing to support the union drive.


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  Starbucks Corporation (SBUX) - Names Laxman Narasimhan as its next CEO. Will work closely with interim CEO Howard Schultz before assuming the CEO role and joining the Board on April 1st, 2023. Narasimhan most recently served as CEO of Reckitt. Separately, Starbucks filed an automatic mixed securities shelf.


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  Tesla, Inc. (TSLA) - Piper Sandler raises PT to USD 360 (prev. 344), keeps Overweight rating, but warned that several cross-currents may conspire to pressure Tesla's shares in the coming weeks, including shorter wait times, China weakness, rising interest rates. Piper also thinks Tesla will likely cut prices next year.


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  Lululemon Athletica Inc. (LULU) - Q2 adj. EPS 2.20 (exp. 1.87), Q2 revenue USD 1.90bln (exp. 1.77bln). Exec said momentum continued in Q2. Sees Q3 net revenue 1.78bln-1.81bln (exp. 1.74bln). Raised FY net revenue guidance to 7.87bln-7.94bln from 7.61bln-7.71bln (exp. 7.69bln); raised FY net EPS guidance to 9.75-9.90 (exp. 9.44, prev. guidance 9.35-9.50).

TECH:

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  Apple Inc. (AAPL) - Workers at a store in Oklahoma City have filed with the National Labor Relations Board to hold a union election, becoming the third US location to have done so, The Verge reports. Over 70% of the store’s staff are interested in being represented by the Communications Workers of America (CWA); the NLRB’s bar for a sufficient showing of interest for an election is 30%, Verge said.


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  Alphabet Inc. (GOOG) - Alphabet's Google plans to accept the use of third-party payment services on its smartphone app in most major countries, but not the in the US, according to Nikkei, marking a turning point in its conflict with foreign authorities who have been calling for the opening of payment systems to the outside to promote competition.


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  Broadcom Inc. (AVGO) - Q3 adj. EPS 9.73 (exp. 9.56), Q3 revenue USD 8.46bln (exp. 8.37bln). Q3 semi revenue USD 6.624bln (exp. 6.379bln), Q3 software revenue USD 1.84bln (exp. 1.873bln). Exec said it expects solid demand across end markets to continue in Q4, reflecting continued investment by its customers of next generation technologies in data centers, broadband, and wireless. CEO expects solid demand to continue in Q4, networking segment to increase +30% Y/Y, server storage connectivity revenue to grow around +45% Y/Y, broadband business to grow more than +20% Y/Y in Q4. Sees Q4 revenue at USD 8.9bln (exp. 8.72bln).


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  HashiCorp, Inc. (HCP) - Q2 EPS -0.17 (exp. -0.31), Q2 revenue USD 113.9mln (exp. 102mln). Sees Q3 EPS between -0.32 and -0.30 (exp. -0.34). Sees FY23 EPS between -0.97 and -0.95 (exp. -1.17), and raises FY23 revenue outlook to between USD 442-448mln (exp. 428mln, orev. 422-432mln).


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  nCino, Inc. (NCNO) - Q2 EPS -0.04 (exp. -0.08), Q2 revenue USD 99.6mln (exp. 97.5mln). Announced that Rabobank Australia and New Zealand has selected the nCino Bank Operating System. Sees Q3 EPS between -0.03 and -0.02 (exp. -0.07), and sees Q3 revenue between USD 103-104mln (exp. 101.8mln). FY23 EPS expected between -0.19 and -0.17 (exp. -0.29), and FY23 revenue is seen between USD 401.5-403.5mln (exp. 391.5mln).


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  PagerDuty, Inc. (PD) - Q2 adj. EPS -0.04 (exp. -0.08), Q2 revenue USD 90.3mln (exp. 88mln). Exec said it continued to see strong demand across regions and verticals. Boosted FY23 EPS outlook to -0.12 and -0.10 (Exp. -0.18, prev. guidance -0.21 to -0.17), and raises FY23 revenue outlook to USD 365-370mln (exp. 366mln, prev. 364-369mln).


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  Smartsheet Inc. (SMAR) - Q2 adj. EPS -0.10 (vs. -0.05 Y/Y), Q2 revenue USD 186.7mln (exp. 180.2mln). Exec said as it heads into H2, will continue disciplined operational approach. Sees Q3 adj, EPS between -0.16 and -0.15, and sees Q3 revenue between USD 193-194mln (exp. 195.1mln). Raises FY23 EPS outlook to -0.56 and -0.49 (prev. guidance -0.67 and -0.59), and lowers its FY23 revenue outlook to USD 750-755mln (prev. guidance 756-761mln, exp. 756.3mln). Smartsheet acquired brand management, templating and creative automation platform 'Outfit'; no terms.

COMMUNICATIONS:

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  T-Mobile US (TMUS) - T-Mobile reportedly won a majority of the 2.5GHz spectrum licenses; FCC said T-Mobile spent USD 304mln for 7,154 licenses.

ENERGY:

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  Shell (SHEL) - CEO van Beurden is preparing to step down in 2023, according to Reuters; four executives have been shortlisted as successors.


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  Shell plc (SHEL), Exxon Mobil Corporation (XOM) - Shell and Exxon subsidiaries to sell interests in Aera JV to German asset manager IKAV for around USD 4bln in cash, companies announced, moving out of mature energy properties at a time when high oil and gas prices favour new deals, Reuters reports.

INDUSTRIALS:

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  Delta Air Lines, Inc. (DAL) - CEO Edward Bastian sold 47.5 common shares on August 31st for USD 31.577/shr.

FINANCIALS:

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  Euro Stoxx 50 - As part of the reshuffle, Nokia (NOKIA FH) and Nordea (NDA FH) are to join the Euro Stoxx 50 index, with Kone (KNEBV FH) and Philips (PHIA NA) to exit.


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  Pershing Square (PSHZF) - August net performance +2.9% Y/Y; YTD performance -16.1%.

HEALTH CARE:

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  Pfizer (PFE), BioNTech (BNTX) - CDC cleared reformulated Covid shots that target the latest omicron subvariants for the autumn, CNBC reports; its agency’s independent committee on vaccines voted 13-1 in favour of the shots made by Pfizer and BioNTech.

02 Sep 2022 - 09:11- Fixed IncomeData- Source: Newsquawk