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05/07/22 Briefing




The S&P 500 futures are down 34 points and are trading 0.9% below fair value. The Nasdaq 100 futures are down 128 points and are trading 1.3% below fair value. The Dow Jones Industrial Average futures are down 243 points and are trading 0.7% below fair value.

The early disposition leans negatively with growth concerns continuing to act as a headwind. Those concerns have shown up in a flattening Treasury yield curve and the euro trading at a 20-year low against the dollar (EUR/USD currently 1.0295).

Other macro factors at work in keeping a lid on bullish sentiment include reports that the eurozone's Sentix Economic Confidence Index saw its lowest reading on Monday (-26.4) since May 2020, South Korea had its highest inflation print (6.0% yr/yr) since 1998, the Yangtze Delta region has seen a rise in COVID cases, and oil and gas workers in Norway have gone on strike over pay.

Separately, the Reserve Bank of Australia raised its key policy rate by 50 basis points, as expected, to 1.35%, another crypto lender, Vauld, has paused customer withdrawals, Russia is shutting down the Nord Stream 1 pipeline for summer maintenance work, and the Biden Administration is said to be close to rolling back tariffs on some Chinese imports.

Coming off the holiday weekend, there are a lot of moving headline parts with respect to macro factors, yet the market-moving corporate news is sparse.

The 2-yr note yield and the 10-yr note yield are both yielding 2.89%.

In corporate news:

  • Occidental Petroleum (OXY 60.91, +0.47, +0.8%): 10% owner Berkshire Hathaway (Warren Buffett) bought 9,887,040 shares worth ~$582.4mln

  • Cowen Group (COWN 27.78, +3.74, +15.6%): Toronto-Dominion Bank (TD) is considering possible bid for COWN, according to Bloomberg

  • Tesla (TSLA 674.06, -7.73, -1.1%): In the second quarter, co produced over 258,000 vehicles and delivered over 254,000 vehicles; June 2022 was the highest vehicle production month in Tesla's history

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Tuesday on a mostly higher note. Japan's Nikkei +1.0%; Hong Kong's Hang Seng +0.1%; China's Shanghai Composite unchnaged; India's Sensex -0.2%; South Korea's Kospi +1.8%; and Australia's All Ordinaries +0.3%. 

  • In economic data:

  • China's June Caixin Services PMI 54.5 (expected 49.7; last 41.4)

  • Japan's June Services PMI 54.0 (last 54.2). May Overtime Pay 5.5% yr/yr (last 5.9%). May Overall Wage Income 1.0% (last 1.3%)

  • South Korea's June CPI 0.6% m/m (expected 0.5%; last 0.7%); 6.0% yr/yr (expected 5.9%; last 5.4%)

  • India's June Nikkei Services PMI 59.2 (expected 58.7; last 58.9)

  • Singapore's May Retail Sales 1.8% m/m (last 1.1%); 17.8% yr/yr (last 12.1%)

  • Australia's June AIG Construction Index 46.2 (last 50.4) and June Services PMI 52.6 (last 53.2). May Retail Sales 0.9% m/m, as expected (last 0.9%)

  • New Zealand's Q2 NZIER Business Confidence -65% (last -40%)

  • In news:

  • A former Bank of Japan chief economist said that he expects the BoJ to increase its inflation forecast and maintain ultra-loose policy.

  • South Korea's CPI increased at its fastest yr/yr pace since late 1998 in the June reading.

  • The Biden administration is expected to reverse tariffs on imports from China.

  • The Reserve Bank of Australia raised its cash rate by 50 bps to 1.35%, as expected.

  • Major European indices trade in the red amid ongoing worries about global growth. STOXX Europe 600 -0.5%; Germany's DAX -1.0%; UK's FTSE 100 -0.9%; France's CAC 40 -1.1%; Italy's FTSE MIB -0.7%; and Spain's IBEX 35 -0.4%. 

  • In economic data:

  • Eurozone's June Services PMI 53.0 (expected 52.8; last 56.1)

  • Germany's June Services PMI 52.4, as expected (last 55.0)

  • U.K.'s June Services PMI 54.3 (expected 53.4; last 53.4)

  • France's June Services PMI 53.9 (expected 54.4; last 55.0). May Industrial Production 0.0% m/m (expected 0.2%; last -0.3%)

  • Italy's June Services PMI 51.6 (expected 51.5; last 53.7)

  • Spain's June Services PMI 54.0 (expected 53.5; last 56.5)

  • In news:

  • Dutch farmer protests against stricter environmental rules grew over the weekend.

  • Norwegian oil and gas workers went on strike, demanding higher pay.

  • NATO allies signed accession protocols for Finland and Sweden.

  • European Central Bank policymaker De Guindos said that the size of the September rate hike will depend on the updated medium-term inflation outlook.

 

U.S. equity futures:

  • S&P 500 Futures: -28 @ 3,797

  • DJIA Futures: -236 @ 30,861

  • Nasdaq 100 Futures: -111 @ 11,475

Overseas:

  • Europe: 

  • Asia: Nikkei +1.0%, Hang Seng +0.1%, Shanghai Composite UNCH

Commodities:

  • Crude Oil -0.46 @ 107.97

  • Nat Gas -0.367 @ 5.503

  • Gold -2.75 @ 1798.75

  • Silver +0.010  @ 19.677

  • Copper -0.0845 @ 3.4825

U.S. Summary:

  • Earnings/Guidance:

  • CME Group (CME) reports Q2 and June 2022 market statistics; Average daily volume increased 25% to 23.1 million contracts during the second quarter

  • Exxon Mobil (XOM) sees Russia production impact of negative $100-200 mln in Q2

  • Niu Technologies (NIU) reports Q2 sales volume declined 17.4% yr/yr

  • Tesla (TSLA) reports Q2 production of 258,580 vehicles

  • General News:

  • Biden administration planning reversal of tariffs on imports from China, according to MarketWatch

  • Likelihood of U.S. recession increases, according to Bloomberg

  • Bank of England releases Financial Stability Report; global economic conditions have worsened

  • British lenders told to brace for economic storm, according to Reuters

  • Russia claims victory in Luhansk province, according to Reuters

  • NATO expansion begins, according to Bloomberg

  • President Biden plans to block new offshore oil drilling in the Atlantic and Pacific oceans, while allowing limited expansion in Gulf of Mexico and Alaska's south coast, according to the Wall Street Journal

  • European Securities and Markets Authority (ESMA) published the results of its fourth stress test exercise of Central Counterparties

  • Adagio Therapeutics (ADGI) announces that industry and infectious disease veteran David Hering, who has been serving as the company's interim chief executive officer and chief operating officer, has been named permanent CEO and a director on the company's Board of Directors

  • American Water Works (AWK) submits rate review request; applies for new revenue to fund infrastructure and service improvements

  • AmerisourceBergen (ABC) and two other distributors enter into agreement with Oklahoma to resolve opioid-related claims

  • Anebulo Pharmaceuticals (ANEB) Announces Positive Topline Data for ANEB-001 from a Phase 2 Clinical Trial for Acute Cannabinoid Intoxication

  • Arrowhead (ARWR) initiates Phase 1/2a studies for two pulmonary candidates ARO-MUC5AC and ARO-RAGE

  • Atlas Technical Consultants (ATCX) receives $18 mln contract with Caltrans

  • Bright Green (BGXX) CEO Ed Robinson stepping down

  • BWX Technologies (BWXT) awarded contract by Bruce Power valued at ~CA$130 mln in support of Bruce Power's Major Component Replacement Project

  • BYD (BYDDY) takes lead in global EV sales, according to Financial Times

  • CureVac (CVAC) files patent infringement lawsuit in Germany against BioNTech (BNTX)

  • Digital World Acquisition Corp (DWAC) has been subpoenaed in federal criminal probe

  • Dyne Therapeutics (DYN): FDA lifts clinical hold, clears IND application to initiate clinical trial of DYNE-251

  • Enochian Biosciences (ENOB) discovers that former scientific advisor altered two different sets of animal data

  • Estee Lauder (EL) Too Faced brand is shutting down its Tmall Global flagship, according to Womens Wear Daily

  • Fulcrum Therapeutics (FULC) enrolls first patient in pivotal global Phase 3 clinical trial of Losmapimod

  • Gold Royalty (GROY) receiving royalty payments related to Newmont's Borden Mine

  • Healthcare Trust of America (HTA) reports portfolio leased rate increased by 0.3% since Q1

  • Intercept Pharma (ICPT) announced that the transaction between Intercept and Advanz Pharma has now closed

  • IVERIC bio (ISEE) and DelSiTech Ltd announce an exclusive global license agreement for new formulations of Zimura; ISEE to make upfront payment of 1.25 mln

  • KalVista Pharmaceuticals (KALV) Presents New Data for Sebetralstat and its Oral Factor XIIa Inhibitor Program

  • Lockheed Martin (LMT) awarded a $192 mln US Navy contract modification related to Australia Surface Combatant program

  • lululemon athletica (LULU) plans to introduce the brand to more communities around the world by opening two new stores and a local e-commerce site in Spain

  • Nevro (NVRO): Newly Released Clinical Data Demonstrates Substantial Improvement in Overall Health-Related Quality of Life in Patients with Painful Diabetic Neuropathy Treated with Nevro HFX Spinal Cord Stimulation Therapy

  • New Fortress Energy (NFE) and Apollo Funds agree to form a new joint venture for LNG Maritime Infrastructure; transaction valued at approximately $2 billion

  • New Fortress Energy (NFE) announces agreement with CFE to expand supply of natural gas to Baja; announces agreement with Pemex to complete Lakach Offshore Gas Field

  • Northrop Grumman (NOC) awarded a $338 mln US Navy contract related to H-1 avionics and weapons

  • Occidental Petro (OXY) 10% owner Berkshire Hathaway (Warren Buffett) bought 9,887,040 shares worth ~$582.4mln

  • Petrobras (PBR) signed an agreement with the ANP

  • PyroGenesis (PYR) Canada confirms delivery of plasma torch to one of the world's largest producers of iron ore for use in induration furnace

  • Sanofi (SNY): FDA approves Sanofi's licensure request for vaccine approval for the upcoming 2022-2023 flu season

  • Scholar Rock (SRRK) to Present Phase 3 SAPPHIRE Trial Design at the 17th International Congress on Neuromuscular Diseases (ICNMD 2022)

  • Seagen (SGEN) Announces Results from Pivotal MOUNTAINEER Trial Demonstrating Clinically Meaningful Antitumor Activity of TUKYSA (tucatinib) in Combination with Trastuzumab in Previously Treated HER2-Positive Metastatic Colorectal Cancer

  • Sonoco Products (SON) is expanding post-consumer recovery and recycling opportunities for paper cups in bales of mixed paper to be used as raw material at its Hartsville, S.C., paperboard mill to produce new paperboard

  • TC Energy (TRP) agreed with Mexico to build a $5 bln gas pipeline in Veracruz, according to Reuters

  • Telus (TU) announced the investment of $23 billion in network infrastructure, operations, and spectrum across Ontario over the next four years and has committed to investing $70 billion overall across Canada by 2026

  • Tesla's (TSLA) lithium supplier facing probe, according to Financial Times

  • TSMC (TSM) supplier forecasts higher chip prices, according to Bloomberg

  • Vermilion Energy (VET) receives TSX approval for normal course issuer bid

  • M&A:

  • AST SpaceMobile (ASTS) sells majority stake in NanoAvionics

  • AstraZeneca (AZN) to acquire TeneoTwo and its clinical-stage T-cell engager

  • Booking Holdings (BKNG): UK CMA is investigating the anticipated acquisition by Booking Holdings Inc of certain activities of Etraveli Group AB

  • China Petroleum (SNP) acquires trillion cubic meters of shale gas resources in Southwestern Sichuan, China

  • Cowen Group (COWN): Toronto-Dominion Bank (TD) is considering possible bid for COWN, according to Bloomberg

  • Eaton (ETN) acquires 50% stake in Jiangsu Huineng Electric Co., Ltd.'s circuit breaker business

  • FEMSA (FMX) to acquire Valora Holding AG

  • Group 1 Auto (GPI) has closed on the disposition of its Brazil operations

  • HEXO (HEXO) shareholders approve note transaction with Tilray (TLRY)

  • KKR (KKR): Consortium led by KKR expected to bid for Deutsche Telekom unit, according to Bloomberg

  • GCM Grosvenor (GCMG) and Blue Wolf Capital acquire Hallcon Corporation

  • Healthcare Realty (HR): Independent Proxy Advisory Firm ISS Recommends Healthcare Realty Trust Shareholders Vote for Proposed Transaction With Healthcare Trust of America

  • Hecla Mining (HL) acquires Alexco Resource (AXU)

  • Nelnet (NNI) acquires solar construction firm GRNE Solutions; terms of the deal not disclosed

  • Ring Energy (REI) acquires Stronghold's Permian Basin assets

  • Tupperware (TUP) divests Nutrimetics

  • Syndicate

  • Acumen Pharmaceuticals (ABOS) files for $200 mln mixed securities shelf offering

  • Alpha Teknova (TKNO) files for $225 mln mixed securities shelf offering

  • atai Life Sciences N.V. (ATAI) files for $300 mln mixed securities shelf offering

  • CEL-SCI Corp (CVM) files for $150 mln mixed securities shelf offering

  • Centessa Pharmaceuticals (CNTA) files for $350 mln mixed securities shelf offering

  • Century Therapeutics (IPSC) files for $500 mln mixed securities shelf offering

  • ChargePoint (CHPT) files for $1 bln mixed securities shelf offering

  • DarioHealth (DRIO) files for 226,586 share common stock offering by selling shareholder related to warrants

  • Earthstone Energy (ESTE) files for 19,417,476 share common stock offering by selling shareholders

  • JAKKS Pacific (JAKK) files for 2 mln share common stock offering

  • Monte Rosa Therapeutics (GLUE) files for $300 mln mixed securities shelf offering

  • Newegg Commerce (NEGG) files for $300 mln mixed securities shelf offering; also files for 60 mln share common stock offering by selling shareholder

  • Office Properties Income Trust (OPI) files mixed securities shelf offering

  • Ondas Holdings (ONDS) files for 780,000 share common stock offering by selling shareholder

  • POINT Biopharma (PNT) files for $400 mln mixed securities shelf offering

  • Verve Therapeutics (VERV) files for $400 mln mixed securities shelf offering

  • IPOs:

  • Priced to Trade:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • COWN +12.2%, OCFT +10.8%, ASTS +7.7%, TUP+6.3%, DRIO +5.9%, VET +4.2%, QD +3.2%, CVM+2.4%, OXY +1.3%, HTA +1.1%, SGEN +1%, ICPT+0.9%, TRP +0.7%, ABC +0.6%

  • Gapping down:

  • NIU -6.2%, ATAI -6%, PHG -3.3%, SRRK -3.2%, BGXX-2.7%, DWAC -1.7%, CHPT -0.6%, ABOS -0.6%, IWM-0.6%, QQQ -0.6%, IPSC -0.5%, NEGG -0.5%, VERV-0.5%, SPY -0.5%

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Anheuser-Busch InBev (BUD) upgraded to Buy from Neutral at Citigroup

  • Antero Resources (AR) upgraded to Buy from Hold at Truist; tgt raised to $50

  • Excelerate Energy (EE) upgraded to Overweight from Equal Weight at Wells Fargo; tgt $29

  • Universal Music Group N.V. (UMGNF) upgraded to Conviction Buy from Buy at Goldman

  • Downgrades:

  • Aegon N.V. (AEG) downgraded to Underperform from Neutral at Exane BNP Paribas

  • Aveanna (AVAH) downgraded to Hold from Buy at Truist

  • Burberry plc (BURBY) downgraded to Neutral from Outperform at Exane BNP Paribas

  • HP Inc. (HPQ) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $36

  • NovoCure (NVCR) downgraded to Underperform from In-line at Evercore ISI

  • PerkinElmer (PKI) downgraded to In-line from Outperform at Evercore ISI; tgt $150

  • Sony (SONY) downgraded to Neutral from Buy at Citigroup

  • Talaris Therapeutics (TALS) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $8

  • Others:

  • NetEase (NTES) initiated with an Outperform at Macquarie; tgt $129

  • Shopify (SHOP) initiated with a Mkt Perform at JMP Securities

  • Symbotic (SYM) initiated with a Buy at Needham; tgt $18

  • Symbotic (SYM) initiated with an Outperform at Raymond James; tgt $18

  • Teradyne (TER) initiated with a Neutral at JP Morgan; tgt $120

Upcoming Events:

  • Econ Data:

  • 10:00 ET: Factory Orders for May (Briefing.comConsensus 0.5%; Prior 0.3%)

  • Earnings:

  • Thursday (Jul 7)

  • Morning: HELE

  • Afternoon:  LEVI WDFC

Asia & Europe detail:

Asia: Nikkei +1.0%, Hang Seng +0.1%, Shanghai Composite UNCH

Equity indices in the Asia-Pacific region ended Tuesday on a mostly higher note. A former Bank of Japan chief economist said that he expects the BoJ to increase its inflation forecast and maintain ultra-loose policy. South Korea's CPI increased at its fastest yr/yr pace since late 1998 in the June reading. The Biden administration is expected to reverse tariffs on imports from China. The Reserve Bank of Australia raised its cash rate by 50 bps to 1.35%, as expected.

  • In economic data:

  • China's June Caixin Services PMI 54.5 (expected 49.7; last 41.4)

  • Japan's June Services PMI 54.0 (last 54.2). May Overtime Pay 5.5% yr/yr (last 5.9%). May Overall Wage Income 1.0% (last 1.3%)

  • South Korea's June CPI 0.6% m/m (expected 0.5%; last 0.7%); 6.0% yr/yr (expected 5.9%; last 5.4%)

  • India's June Nikkei Services PMI 59.2 (expected 58.7; last 58.9)

  • Singapore's May Retail Sales 1.8% m/m (last 1.1%); 17.8% yr/yr (last 12.1%)

  • Australia's June AIG Construction Index 46.2 (last 50.4) and June Services PMI 52.6 (last 53.2). May Retail Sales 0.9% m/m, as expected (last 0.9%)

  • New Zealand's Q2 NZIER Business Confidence -65% (last -40%)

---Equity Markets---

  • Japan's Nikkei: +1.0%

  • Hong Kong's Hang Seng: +0.1%

  • China's Shanghai Composite: UNCH

  • India's Sensex: -0.2%

  • South Korea's Kospi: +1.8%

  • Australia's ASX All Ordinaries: +0.3%

---FX---

  • USD/JPY: +0.2% to 136.03

  • USD/CNH: +0.2% to 6.7053

  • USD/INR: +0.5% to 79.28

Europe: DAX -1.0%, FTSE -0.9%, CAC -1.1%

Major European indices trade in the red amid ongoing worries about global growth. Dutch farmer protests against stricter environmental rules grew over the weekend. Norwegian oil and gas workers went on strike, demanding higher pay. NATO allies signed accession protocols for Finland and Sweden. European Central Bank policymaker De Guindos said that the size of the September rate hike will depend on the updated medium-term inflation outlook.

  • In economic data:

  • Eurozone's June Services PMI 53.0 (expected 52.8; last 56.1)

  • Germany's June Services PMI 52.4, as expected (last 55.0)

  • U.K.'s June Services PMI 54.3 (expected 53.4; last 53.4)

  • France's June Services PMI 53.9 (expected 54.4; last 55.0). May Industrial Production 0.0% m/m (expected 0.2%; last -0.3%)

  • Italy's June Services PMI 51.6 (expected 51.5; last 53.7)

  • Spain's June Services PMI 54.0 (expected 53.5; last 56.5)

---Equity Markets---

  • STOXX Europe 600: -0.5%

  • Germany's DAX: -1.0%

  • U.K.'s FTSE 100: -0.9%

  • France's CAC 40: -1.1%

  • Italy's FTSE MIB: -0.7%

  • Spain's IBEX 35: -0.4%

---FX---

  • EUR/USD: -1.2% to 1.0294

  • GBP/USD: -0.9% to 1.1998

  • USD/CHF: +0.5% to 0.9654


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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures