US EARLY MORNING: US index futures are slightly up as banking calm continues; Fed's supervision chief Barr to speak later

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  OVERNIGHT: Asia-Pac stocks were mixed, and after early advances led by energy, though gains were capped as North Korean nuclear rhetoric stoked geopolitical concerns (see here). Data showed Australian retail sales rising +0.2% M/M (exp. 0.1%, prev. 1.8%). Westpac said the key point to note was the volatile monthly profile leading into February, sales posted a steep 3.9% drop in Dec and only a partial 1.8% rebound in January; "this means that February was always likely to post a M/M gain, but that this conceals a material underlying weakening in sales on a three-month basis," and added that "sales are down 1.5%qtr on a rolling three-month basis." European equities also saw a positive open amid calmer conditions in the banking sector, ahead of key inflation data later in the week; Europe has also see some mild support from survey data (last week’s flash PMIs, Monday’s German Ifo), though analysts continue to warn that growth conditions are fragile and could still tilt later this year. Data out of France this morning showed business manufacturing climate falling to 104.0 in March from 105.0 against expectations of a fall to 103.0. After the open, the ECB's supervisory chief Enria was on the wires again, and reiterated that current events confirm that strong, demanding supervision is needed now more than ever.


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  US PRE-MARKETS: US equity futures are slightly better than flat, paring back modest overnight gains. Treasury yields are wider, with the short-end underperforming as the haven bid eases, and traders again begin to price the prospect of an FOMC May rate hike at 50-50. The Fed is in data dependent mode, and officials speaking thus far have reiterated that the primary focus is on inflation, rather than the banking issues – though these banking issues do raise the prospects of a recession later this year, Fed’s Kashkari warned on the weekend – and that could mean that markets continue to trade in a tentative fashion ahead of the third look at Q4 GDP data on Thursday (which has a PCE component), as well as the more timely February PCE report due Friday. Meanwhile, as we approach month-end, Citi's rebalancing model reveals a buy signal for global equities, and a sell signal for global bonds (Note: Barclays estimates the Treasury month-end duration extension is a smallish +0.07yrs). For FX, Citi said its model implies USD selling against all currencies except for the EUR, with both international equity and fixed income investors likely to sell USD this month-end. Highlights for the day ahead include an appearance from the Fed's supervisory chief Barr at a Congressional panel, the Conference Board's gauge of Consumer Confidence for March, FHFA and CaseShiller housing data. On the earnings front, MKC and WBA are due to report before the market open, while MU and LULU are the highlights for the after market close releases.


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  STAY DEFENSIVE, JPM SAYS: Despite the calm seen this week, JPMorgan's equity strategist Marko Kolanovic is still urging a defensive bias, noting that the recent episodes in the banking sector serve to highlight the uncertainty stocks are facing. Kolanovic also expects that economic projections will be revised lower in the coming months, which will dent investor sentiment. JPM is more constructive on US vs European equities, and favours sectors that benefit from lower bond yields (like tech), and warns that unprofitable companies that have depended on equity capital to fund operations appear the most vulnerable – sectors like Corporate Real Estate, shadow banking, leveraged buyout companies. Kolanovic is specifically focused on Office CRE exposures, where he notes that stresses appear to be growing, and reiterated his view that stocks were expected to peak in Q1, with H2 of this year marked by recessionary trading, which should see caution around cyclicals, banks, and the value style. And as the prospects of a recession increase in the later part of the year, JPM sees the inverse correlation between equities and bonds returning, which in down markets, should imply low beta plays work, the opposite to last year, when Value worked.

DAY AHEAD:

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


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  EUROPE DATA/SPEAKERS: There’s very little on the economic data releases docket. On the speakers front, ECB President Lagarde will speak at the BIS, although no text is expected; ECB’s Supervisory Chief Enria will speak on how the European supervisory process is changing. From the UK, we will hear from BoE Governor Ramsden and BoE’s Ramsden, who will both testify to a Treasury Select Committee on Silicon Valley Bank.


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  NORTH AMERICA DATA/SPEAKERS: Consumer confidence data for March is expected to moderate a touch (101.0 expected from 102.9); the advanced goods trade balance for February; weekly RedBook retail sales data; January housing data from the FHFA and CaseShiller. Fed’s head of supervision Barr will today and tomorrow attend Congressional panels on the recent bank failures and the regulatory response.


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  SUPPLY: The Netherlands will sell between EUR 1.5-2.0bln of 2052 DSLs; Italy will sell between EUR 4.25-5.5bln of 2024, 2024 and a 2033 linker; Germany will sell EUR 5.5bln of 2025 Schatz. The US Treasury will auction USD 43bln of 5yr Notes.


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  ENERGY: Brent May 2023 options expire. Weekly API energy inventory data is due after the US close; this week, the street expects headline crude stocks to build by 200k, distillate inventories are seen drawing 1.4mln while gasoline stocks are likely to draw by 1.6mln.

EQUITY NEWS:

FINANCIALS:

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  Credit Suisse (CS) - Japanese Finance Minister said Japan banks’ holdings of Credit Suisse are small, direct impact likely limited; added that officials were carefully watching the impact from the holding of AT1 bonds on financial institutions.


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  UBS (UBS), Credit Suisse (CS) - UBS CEO said they did not acquire Credit Suisse just to shut it down, and Credit Suisse’s wealth and asset management businesses are highly complementary to UBS’. UBS said its investment bank will reinforce its global competitive position.


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  KKR & Co. L.P. (KKR) - KKR and Gaw Capital Partners will acquire Hyatt Regency Tokyo from Odakyu Electric Railway Company.

COMMUNICATIONS:

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  Walt Disney Company (DIS) - Disney has eliminated its next-generation storytelling and consumer experiences unit, the small division that was developing metaverse strategies, WSJ reports. Move comes as part of a broader restructuring that is expected to reduce head count by around 7,000 across the company over the next two months.


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  Meta Platforms Inc. (META) - Plans to lower some bonus pay-outs and will more frequently assess employee performance, according to an internal memo, part of a sweeping revamp of the social-media company that includes large head-count reductions, WSJ reports.


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  Pinterest, Inc. (PINS) - Board committee approves restructuring plan; workforce reduction of approximately 4% that commenced in February, estimates USD 100mln-125mln in charges related to the plan to be incurred in Q1. Actions related to office space reductions are expected to be completed this year.


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  Lyft (LYFT) - Lyft is tapping a board member David Risher as its new CEO, and its two co-founders Logan Green and John Zimmer will step back from managing the company. Risher has management stints at Amazon and Microsoft. Green and Zimmer will retain their seats on the board but not participate in running Lyft day-to-day.

TECH:

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  Alphabet Inc. (GOOG) - Alphabet asked a US federal judge to dismiss a DoJ lawsuit alleging that the search giant illegally abused its dominance of online advertising, Reuters reports. The DoJ along with eight states in January argued that Google should be forced to sell its ad manager suite.


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  TomTom (TMOAY) - TomTom announced a new milestone for its advanced maps for automated driving (AD), providing over 10mln vehicles with automated driving solutions. TomTom sees robust growth in its automated driving solutions offering with volumes increasing more than twice as fast as the global market in 2022.

CONSUMER:

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  Amazon.com, Inc. (AMZN) - A federal judge has ruled that Amazon must face consumer claims that its pricing practices artificially drove up the cost of goods sold by other retailers in violation of US antitrust law, Reuters reports. The ruling on Friday came in a prospective antitrust class action that has estimated damages of between USD 55-172bln.


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  PVH Corp. (PVH) - Surged in afterhours trading following top- and bottom-line beats. Q4 2022 adj. EPS 2.38 (exp. 1.63), Q4 revenue USD 2.49bln (exp. 2.36bln); Q4 Calvin Klein revenue USD 1.02bln (exp. 962.3mln), and Q4 Tommy Hilfiger revenue USD 1.34bln (exp. 1.25bln). Q1 EPS seen around USD 1.90 (exp. 1.88), and Q1 revenue is seen flat Y/Y (exp. 2.1bln). Sees FY23 revenue increasing +3-4% Y/Y (exp. 9.2bln), or +2-3% Y/Y in constant currency, sees FY23 operating margins at approximately 10%, while FY23 EPS is seen around USD 8.97 (exp. 8.92).


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  Starbucks Corporation (SBUX) - National Labor Relations Board said Starbucks violated federal law by refusing to fairly negotiate with workers at dozens of newly unionized cafes across the country, Bloomberg reports. The company can agree to amend its practices or face complaints by regional NLRB directors around the country, NLRB threatened.


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  Diageo (DEO) - Sir Ivan Menezes to retire from Diageo; Debra Crew to be appointed CEO, effective July 1st.

ENERGY:

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  Occidental Petroleum Corporation (OXY), Berkshire Hathaway Inc. (BRK.B) - Berkshire purchased additional stock in Occidental Petroleum, according to a filing; BRK purchased 3.7mln shares, bringing its ownership to 211.7mln (or a 23.5% stake).


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  BP (BP) - BP and ADNOC have agreed on a non-binding pact to take Newmed Energy (DKDRF) private. ADNOC and BP plan a JV for gas development, according to Bloomberg.


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  Energy Transfer (ET) - Energy Transfer to acquire Lotus Midstream for around USD 1.45bln; transaction expected to close in the Q2 2023.


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  Diamondback Energy, Inc. (FANG) - Announced that it has joined the ‘Oil and Gas Methane Partnership 2.0’, the UN Environment Programme’s flagship oil and gas reporting and mitigation programme.

MATERIALS:

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  EV Names - US and Japan reach a trade deal for critical EV battery minerals in which the deal prohibits enacting export restrictions on lithium, cobalt, nickel, manganese and graphite, according to US officials.


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  Albemarle Corporation (ALB) - Australia’s Liontown Resources knocked back an approach from the world’s biggest lithium producer Albemarle on Tuesday that valued Liontown at AUD 5.5bln, Reuters reports. Liontown controls two major lithium deposits in Western Australia which are among the world’s largest and highest-grade hard rock lithium deposits.


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  Enviva Partners, LP (EVA) - John Keppler will return as Executive Chairman after addressing a heart condition, effective April 1st. Thomas Meth will continue as President and CEO; interim chairman Ralph Alexander will transition to the role of lead independent director of the board.

INDUSTRIALS:

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  Nikola Corporation (NKLA) - CFO Kim Brady to retire in April; current Vice President Anastasiya Pasterick will succeed as the company’s new CFO.


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  Virgin Orbit Holdings, Inc. (VORB) - Virgin Orbit Holdings will extend an unpaid furlough for most of its employees as talks seeking new funding continue, Reuters reports.


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  AAR Corp. (AIR) - AAR announced a distribution agreement with Cloud Cap Technology, a Collins Aerospace Mission Systems business, expanding AAR’s presence in the Unmanned Aerial System market.

HEALTH CARE:

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  Merck & Co., Inc. (MRK) - Phase 3 NRG-GY018 trial investigating Keytruda in combination with standard of care chemotherapy then continued as a single agent every six weeks for up to 14 cycles for the first-line treatment of patients with stage III-IV or recurrent endometrial carcinoma whose cancer was either mismatch repair proficient, or pMMR, or mismatch repair deficient, or dMMR showed the Keytruda regimen demonstrated a statistically significant and clinically meaningful improvement in progression-free survival for patients, regardless of mismatch repair status.


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  GSK plc (GSK) - Interim results from Part 1 of the RUBY/ENGOT-EN6/GOG3031/NSGO phase III trial investigating Jemperli plus standard-of-care chemotherapy followed by dostarlimab compared to chemotherapy plus placebo followed by placebo in adult patients with primary advanced or recurrent endometrial cancer were “positive”, exec says.


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  Thermo Fisher Scientific Inc. (TMO) - Said it will accelerate advanced cell therapies for difficult to treat conditions, including cancer, rare diseases, and other illnesses, from a newly opened cGMP manufacturing facility adjacent to UCSF Medical Centre’s Mission Bay campus.

28 Mar 2023 - 09:30- Research Sheet- Source: Newsquawk