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15/08/22 Briefing




The S&P 500 futures are down 25 points and are trading 0.6% below fair value. The Nasdaq 100 futures are down 60 points and are 0.6% below fair value. The Dow Jones Industrial Average futures are down 194 points and are trading 0.5% below fair value.

Futures for the major indices are on the weaker side in response to some weaker-than-expected data out of China that has stirred global growth concerns. Also, market participants are not convinced the rally off the June lows is going to last.

The House passed the Inflation Reduction Act with President Biden expected to sign it later this week.

China's weaker-than-expected economic data included July retail sales, industrial production, and fixed asset investment. These reports presumably prompted the People's Bank of China to cut its one-year medium-term lending facility loan rate and seven-day repurchase rate by ten basis points apiece to a respective 2.75% and 2.0%. 

Meanwhile, Japan's Q2 flash GDP showed an increase of 0.5% quarter-over-quarter. 

WTI crude oil futures are making big downside moves this morning on the growth concerns, down 5.1% to $87.37/bbl. Natural gas futures are down 1.6% to $8.64/mmbtu. Unleaded gasoline future are down 3.9% to $2.92/gal.

The 2-yr note yield is down two basis points to 3.22% while the 10-yr note yield is down three basis points to 2.82%.

In corporate news:

  • Dollar General (DG 250.74, -2.56, -1.01%): downgraded to Market Perform from Outperform at BMO Capital Markets

  • Wells Fagro (WFC 45.60, -0.34, -0.74%): aiming to shrink mortgage business, according to Bloomberg.

  • Tesla (TSLA 903.30, +3.21, +0.36%): CEO Elon Musk tweets "Congrats Giga Shanghai on making millionth car! Total Teslas made now over 3 mln"

  • Westlake Corporation (WLK): announces $500 million expansion of existing share repurchase program and 20% increase in quarterly dividend

  • Li Auto (LI 30.48, -2.01, -6.19%): misses by $0.13, misses on revs

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region began the week on a mixed note while markets in South Korea and India were closed for holidays. Japan's Nikkei: +1.1%, Hong Kong's Hang Seng: -0.7%, China's Shanghai Composite: UNCH, India's Sensex: CLOSED, South Korea's Kospi: CLOSED, Australia's ASX All Ordinaries: +0.5%.

  • In economic data:

  • China's July Retail Sales 2.7% yr/yr (expected 5.0%; last 3.1%), July Industrial Production 3.8% yr/yr (expected 4.6%; last 3.9%), July Fixed Asset Investment 5.7% yr/yr (expected 6.2%; last 6.1%), and July House Prices -0.9% yr/yr (last -0.5%)

  • Japan's flash Q2 GDP 0.5% qtr/qtr (expected 0.6%; last 0.0%); 2.2% yr/yr (expected 2.5%; last 0.1%). Q2 GDP Capital Expenditure 1.4% qtr/qtr (expected 0.9%; last -0.7%) and Q2 External Demand 0.0% qtr/qtr (expected 0.1%; last -0.4%). Q2 GDP Private Consumption 1.1% qtr/qtr (expected 1.3%; last 0.1%). June Industrial Production 9.2% m/m (expected -7.5%; last 8.9%) and June Capacity Utilization 9.6% m/m (last -9.2%)

  • In news:

  • China reported weaker than expected growth figures for July, prompting the People's Bank of China to cut its one-year medium-term lending facility loan rate and seven-day repurchase rate by ten basis points apiece to a respective 2.75% and 2.0%.

  • China's National Bureau of Statistics noted that risks of global stagflation have risen.

  • South Korea's President Yoon said that South Korea and Japan face similar problems and must quickly improve their relations.

  • Major European indices trade little changed, but Italy's MIB is closed, and overall trading volume is on the light side due to Assumption Day holiday. STOXX Europe 600: +0.3%, Germany's DAX: UNCH, U.K.'s FTSE 100: -0.2%, France's CAC 40: +0.1%, Italy's FTSE MIB: CLOSED, Spain's IBEX 35: +0.2%.

  • In economic data:

  • Germany's July WPI -0.4% m/m (expected 0.2%; last 0.1%); 19.5% yr/yr (last 21.2%)

  • Swiss July PPI -0.1% m/m (expected 0.4%; last 0.3%); 6.3% yr/yr (last 6.9%)

  • In news:

  • Germany's Rhine river became impassable due to a low water level at a key point.

  • Bank of England Governor Bailey is reportedly open to reviewing the central bank's mandate after criticism from prime minister candidate Truss.

U.S. equity futures:

  • S&P 500 Futures: -25 @ 4,255

  • DJIA Futures: -195 @ 33,566

  • Nasdaq 100 Futures: -63 @ 13,503

Overseas:

  • Europe: DAX UNCH, FTSE -0.2%, CAC +0.1%

  • Asia: Nikkei +1.1%, Hang Seng -0.7%, Shanghai Composite UNCH

Commodities:

  • Crude Oil -4.84 @ 87.25

  • Nat Gas  -0.145 @ 8.623

  • Gold -26.20 @ 1789.30

  • Silver -0.526  @ 20.172

  • Copper -0.1140 @ 3.5545

U.S. Summary:

  • Earnings/Guidance:

  • Clear Secure (YOU) beats by $0.04, beats on revs; guides Q3 revs in-line

  • DouYu (DOYU) beats by $0.36, beats on revs

  • Li Auto (LI) misses by $0.13, misses on revs

  • Thoughtworks (TWKS) reports EPS in-line, beats on revs; guides Q3 EPS below consensus, revs below consensus; lowers FY22 EPS below consensus, revs below consensus

  • General News:

  • House passes Inflation Reduction Act; President Biden is expected to sign it in the coming days

  • US congressional delegation visited Taiwan, according to Bloomberg

  • China conducts more military drills near Taiwan after lawmakers from US visit, according to Reuters

  • China reports 2,000 COVID-19 cases and imposes additional restrictions in specific regions, according to Bloomberg

  • EU has proposed removing pressure on Iran's Revolutionary Guards to restart nuclear deal with Iran, according to Politico

  • PBOC lowers MLF operation and the reverse repo rates by 10 points to 2.75% and 2.0% respectively

  • IRS will add additional tax enforcement for cryptocurrency transactions, according to Forbes

  • Energy Secretary Jennifer Granholm believes clean energy policies must include nuclear energy, according to Fox News

  • Banks have resumed Russian bond trading, according to Reuters

  • World Health Organization will rename monkeypox, according to ABC News

  • Moody's downgrades Turkey rating to B3, changes outlook to stable

  • Affirm (AFRM) CEO is confident in the company's lending model, according to the Wall Street Journal

  • Alphabet (GOOG): YouTube aiming to introduce online store for streaming video services, according to the Wall Street Journal

  • AstraZeneca (AZN): Enhertu significantly delayed disease progression in DESTINY-Breast02 Phase III trial vs. physician's choice of treatment in patients with HER2-positive metastatic breast cancer

  • atai Life Sciences N.V. (ATAI) secures term loan facility for up to $175 million from hercules capital

  • BeiGene (BGNE) announces a strategic agreement with Ontada to improve U.S. community oncology care through the development of real-world evidence data, tools, and insights to help increase access to affordable, cutting-edge therapies

  • BRP Inc. (DOOO) reports that the Company's efforts to restore systems and business operations are continuing following the recent cyberattack

  • Carnival (CCL) updates COVID protocols, no testing for vaccinated guests, unvaccinated guests no longer required to apply for a vaccine exemption; also says ships have been sailing very full all summer

  • Ceragon (CRNT) announces Ronen Stein as CFO effective Sept. 21, 2022

  • ChromaDex (CDXC) loses patent challenge decision, upholding ChromaDex's intellectual property held under exclusive license from Dartmouth college

  • Civeo (CVEO) announces agreement to repurchase approximately 375 thousand common shares

  • Clene (CLNN) announces "positive" topline results from the Phase 2 VISIONARY-MS trial of CNM-Au8

  • Embecta Corp. (EMBC) announces inaugural quarterly cash dividend

  • Emergent BioSolutions (EBS): FDA issues warning letter for its Camden manufacturing facility

  • Lockheed Martin (LMT) awarded a US Navy $7.6 bln undefinitized modification to a previously awarded advanced acquisition contract

  • New York Times (NYT) hires banker to advise on activist issue, according to Reuters

  • Novartis AG (NVS) provides update on Phase III CANOPY-A study evaluating canakinumab as adjuvant treatment in non-small cell lung cancer

  • Opthea Ltd. (OPT) secures up to $170 million in non-dilutive financing for OPT-302 in wet AMD

  • Peloton (PTON) plans to cut 800 jobs, increase prices and shut stores, according to Bloomberg

  • PG&E (PCG): California Governor Gavin Newsom wants to give PG&E $1.4 bln government loan to keep nuclear plant open, according to Reuters

  • Raytheon Technologies (RTX) awarded a $132 mln modification to a previously awarded US Air Force contract

  • Restaurant Brands Int'l (QSR) renews normal course issuer bid

  • Shoals Technologies (SHLS) announced that Mr. Dominic Bardos has been appointed as Chief Financial Officer, effective October 3, 2022

  • Six Flags (SIX): There was a shooting at a Six Flags parking lot. Three people were injured.

  • Tesla (TSLA) CEO Elon Musk tweets "Congrats Giga Shanghai on making millionth car! Total Teslas made now over 3 mln"

  • Versabank (VBNK) receives TSX approval for normal course issuer bid

  • Viridian Therapeutics (VRDN) announces positive initial clinical data from ongoing phase 1/2 trial evaluating vrdn-001 in patients with thyroid eye disease

  • Wells Fargo (WFC) aiming to shrink mortgage business, according to Bloomberg

  • Westlake Corporation (WLK) announces $500 million expansion of existing share repurchase program and 20% increase in quarterly dividend

  • M&A:

  • Breeze Holdings Acquisition Corp. (BREZ) and D-Orbit S.p.A. mutually agree to terminate merger agreement

  • California Resources Corp (CRC): Kimmeridge has purchased stake in CRC and is pushing for changes, according to Reuters

  • Fortress Transportation and Infrastructure (FTAI) announces merger which will eliminate its partnership tax classification and result in the public entity being a corporation

  • MKS Instruments (MKSI) and Atotech (ATC) announce approval from Royal Court of Jersey for MKS' pending acquisition of Atotech

  • Nexstar (NXST) to acquire The CW Network from Paramount Global (PARA) and Warner Bros. Discovery (WBD)

  • PlayAGS (AGS) confirms receipt of offer to be acquired at $10/sh; proposal was not accepted although co remains in preliminary discussions with such third party

  • Rio Tinto (RIO) reiterates compelling value of proposal to acquire full ownership of Turquoise Hill (TRQ)

  • Turquoise Hill Resources (TRQ) special committee finds Rio Tinto's (RIO) privatization proposal does not reflect full & fair value of the company

  • Syndicate

  • Apexigen (APGN) files for 3,724,500 share common stock offering issuable on exercise of warrants; also files for 14,434,863 share common stock offering by selling shareholders, relates to warrants

  • Covenant Logistics (CVLG) files for $200 mln mixed securities shelf offering, relates to warrants

  • Cyxtera Technologies (CYXT) files for $300 mln mixed securities shelf offering; also files for 130,263,898 share common stock offering by selling shareholders

  • Sonoco Products (SON) files mixed securities shelf offering

  • Valneva SE (VALN) files for $200 mln mixed securities shelf offering

  • IPOs:

  • Expected to Price:

  • No IPOs expected.

Gapping Up/Down

  • Gapping up:

  • VRDN +48.7%, AGS +11.1%, DOYU +10.4%, EMBC+4.7%, YOU +3.3%, WEBR +2.6%,

  • Gapping down:

  • TRQ -24.1%, CLNN -11.6%, APGN -8.9%, LI -6.3%, RIO -3.2%, HALO -2.6%, CYXT -2.5%, CRC -2.2%, PTON -2.1%, NAT -1.5%,

 

Analyst Research (see Upgrades/Downgradescalendarfor full list):

  • Upgrades

  • Air Products (APD) upgraded to Outperform from Market Perform at BMO Capital Markets; tgt raised to $321

  • Cullen/Frost (CFR) upgraded to Buy from Neutral at Compass Point; tgt $152

  • Dillard's (DDS) upgraded to Neutral from Underweight at JP Morgan; tgt raised to $298

  • Downgrades:

  • American Equity Investment Life (AEL) downgraded to In-line from Outperform at Evercore ISI; tgt raised to $44

  • Avalara (AVLR) downgraded to Mkt Perform from Outperform at Raymond James

  • Charter Comm (CHTR) downgraded to Neutral from Overweight at Atlantic Equities; tgt lowered to $477

  • CME Group (CME) downgraded to Mkt Perform from Outperform at Raymond James

  • Comcast (CMCSA) downgraded to Neutral from Overweight at Atlantic Equities; tgt lowered to $44

  • Dollar General (DG) downgraded to Market Perform from Outperform at BMO Capital Markets; tgt $265

  • Equifax (EFX) downgraded to Neutral from Overweight at Atlantic Equities; tgt raised to $225

  • Others:

  • 1stdibs.com(DIBS) assumed with an Overweight at Barclays; tgt $9

  • Academy Sports + Outdoors (ASO) initiated with an Equal-Weight at Morgan Stanley; tgt $50

  • Etsy (ETSY) initiated with an Equal Weight at Barclays; tgt $100

Upcoming Events:

  • Econ Data:

  • 08:30 ET: Empire State Manufacturing for Aug (Briefing.comConsensus 5.0; Prior 11.1)

  • 10:00 ET: NAHB Housing Market Index for Aug (Briefing.comConsensus 55; Prior 55)

  • 16:00 ET: TIC Net Long-Term Transactions for Jun (Briefing.comConsensus NA; Prior $155.3B)

  • Earnings:

  • Monday (Aug 15)

  • Morning:  YOU DOYU LI TWKS WEBR

  • Afternoon: LFG BLND COMP FN FLNC GLBE NVTS SHLS TME TDUP ZIP

  • Tuesday (Aug 16)

  • Morning: GENI HD HUYA IHS LITE ONON PINC SE WMT

  • Afternoon:  A JKHY

  • Wednesday (Aug 17)

  • Morning:  ADI DNUT LOW PFGC SFL TGT TJX

  • Afternoon:  AMCR BBWI CSCO KEYS SNPS WOLF

  • Thursday (Aug 18)

  • Morning: BJ CSIQ EL KSS NTES NICE SLQT SPTN TPR

  • Afternoon:  AMAT BILL GLOB OSIS ROST

  • Friday (Aug 19) 

  • Morning:  BKE DE FL VIPS

Asia & Europe detail:

Asia: Nikkei +1.1%, Hang Seng -0.7%, Shanghai Composite UNCH

Equity indices in the Asia-Pacific region began the week on a mixed note while markets in South Korea and India were closed for holidays. China reported weaker than expected growth figures for July, prompting the People's Bank of China to cut its one-year medium-term lending facility loan rate and seven-day repurchase rate by ten basis points apiece to a respective 2.75% and 2.0%. China's National Bureau of Statistics noted that risks of global stagflation have risen. South Korea's President Yoon said that South Korea and Japan face similar problems and must quickly improve their relations.

  • In economic data:

  • China's July Retail Sales 2.7% yr/yr (expected 5.0%; last 3.1%), July Industrial Production 3.8% yr/yr (expected 4.6%; last 3.9%), July Fixed Asset Investment 5.7% yr/yr (expected 6.2%; last 6.1%), and July House Prices -0.9% yr/yr (last -0.5%)

  • Japan's flash Q2 GDP 0.5% qtr/qtr (expected 0.6%; last 0.0%); 2.2% yr/yr (expected 2.5%; last 0.1%). Q2 GDP Capital Expenditure 1.4% qtr/qtr (expected 0.9%; last -0.7%) and Q2 External Demand 0.0% qtr/qtr (expected 0.1%; last -0.4%). Q2 GDP Private Consumption 1.1% qtr/qtr (expected 1.3%; last 0.1%). June Industrial Production 9.2% m/m (expected -7.5%; last 8.9%) and June Capacity Utilization 9.6% m/m (last -9.2%)

---Equity Markets---

  • Japan's Nikkei: +1.1%

  • Hong Kong's Hang Seng: -0.7%

  • China's Shanghai Composite: UNCH

  • India's Sensex: CLOSED

  • South Korea's Kospi: CLOSED

  • Australia's ASX All Ordinaries: +0.5%

---FX---

  • USD/JPY: -0.1% to 133.33

  • USD/CNH: +0.7% to 6.7799

  • USD/INR: -0.1% to 79.51

Europe: DAX UNCH, FTSE -0.2%, CAC +0.1%

Major European indices trade little changed, but Italy's MIB is closed, and overall trading volume is on the light side due to Assumption Day holiday. Germany's Rhine river became impassable due to a low water level at a key point. Bank of England Governor Bailey is reportedly open to reviewing the central bank's mandate after criticism from prime minister candidate Truss.

  • In economic data:

  • Germany's July WPI -0.4% m/m (expected 0.2%; last 0.1%); 19.5% yr/yr (last 21.2%)

  • Swiss July PPI -0.1% m/m (expected 0.4%; last 0.3%); 6.3% yr/yr (last 6.9%)

---Equity Markets---

  • STOXX Europe 600: +0.3%

  • Germany's DAX: UNCH

  • U.K.'s FTSE 100: -0.2%

  • France's CAC 40: +0.1%

  • Italy's FTSE MIB: CLOSED

  • Spain's IBEX 35: +0.2%

---FX---

  • EUR/USD: -0.5% to 1.0206

  • GBP/USD: -0.3% to 1.2094

  • USD/CHF: +0.5% to 0.9453


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