17/10/22 Briefing

The S&P 500 futures are points up 41 and are trading roughly 1.3% above fair value. The Nasdaq 100 futures are points up 145 and are trading 1.4% above fair value. The Dow Jones Industrial Average futures are up 282 points and are trading 1.1% above fair value.

Equity futures have a positive disposition this morning after the new UK Finance Minister, Jeremy Hunt, announced a reversal of almost all of the tax measures in the prior "mini-budget." Mr. Hunt added that this will raise GBP 32 billion.

This announcement has calmed the currency and UK gilt markets. The 10-yr gilt yield down is down 48 basis points to 3.91%. The US Dollar Index is down 0.3% to 112.99 with GBP/USD +1.0% to 1.1292. The 2-yr note yield is down five basis points to 4.45% and the 10-yr note yield is down six basis points to 3.95%.

Morgan Stanley Chief Strategist Wilson said in a note that there's a good opportunity for the S&P 500 to have sizable technical rally, assuming there's no major earnings disappointments or a recession.

China reaffirmed its zero coronavirus policy and President Xi added he is aiming to achieve a peaceful unification with Taiwan, but won't rule out use of force. 

Today's lone economic release is the October Empire State Manufacturing Survey at 8:30 a.m. ET.

In corporate news: 

• Apple (AAPL 140.23 +1.85 +1.34%): Morgan Stanley named the stock a top pick in the event of an economic downturn

• Continental Resources (CLR 74.02 +5.80 +8.50%): to be acquired by the Hamm Family for $74.28 per share

• Bank of America (BAC 32.63 +0.93 +2.93%): beats by $0.03, beats on revs

• Fox Corporation (FOXA 29.95 -1.60 -5.07%): forms special committee to begin exploring a potential combination with News Corporation (NWSA); Credit Suisse downgrades to Neutral from Outperform

• BNY Mellon (BK 40.08 +1.67 +4.35%): beats by $0.13, beats on revs

• Archaea Energy (LFG 25.85 +8.97 +53.14%):  to be acquired by bp (BP) for ~$4.1 bln

• Goldman Sachs (GS 304.40, +4.41, +1.5%): aiming to combine investment banking and trading units, according to WSJ

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region began the week on a mostly higher note. Japan's Nikkei: -1.2%, Hong Kong's Hang Seng: +0.2%, China's Shanghai Composite: +0.4%, India's Sensex: +0.9%, South Korea's Kospi: +0.3%, Australia's ASX All Ordinaries: -1.4%.

  • In economic data:

    • Japan's August Industrial Production 3.4% m/m (expected 2.7%; last 2.7%) and Capacity Utilization 1.2% m/m (last 2.4%). August Tertiary Industry Activity Index 0.7% m/m (expected 0.3%; last -0.5%)

    • South Korea's September trade deficit $3.78 bln (last deficit of $3.70 bln). September Imports 18.6% yr/yr (last 18.6%) and Exports 2.7% yr/yr (last 2.8%)

    • Singapore's September trade surplus SGD5.75 bln (last surplus of SGD3.738 bln). September non-oil exports -4.0% m/m (expected -2.1%; last -3.9%); 3.1% yr/yr (expected 7.1%; last 11.4%)

  • In news:

    • Japan's Finance Minister Suzuki said that the G-20 has a shared understanding over currency volatility and repeated that excessive speculative moves will be countered.

    • The approval rating of Japan's cabinet has dropped to 33.1%, according to ANN.

    • Bank of Japan Governor Kuroda said that inflation is expected to continue accelerating into the end of 2022 but is expected to return below 2.0% in FY23/24.

    • Policymakers at the Bank of Korea reportedly expect a terminal rate above 3.50%. China will reportedly delay the release of its Q3 growth figures.

• Major European indices trade in the green. STOXX Europe 600: +0.9%, Germany's DAX: +1.1%, U.K.'s FTSE 100: +0.8%, France's CAC 40: +0.9%, Italy's FTSE MIB: +1.0%, Spain's IBEX 35: +1.7%.

  • In economic data:

    • Italy's September CPI 0.3% m/m, as expected (last 0.8%); 8.9% yr/yr, as expected (last 8.4%)

  • In news:

    • The British pound is climbing against the dollar and Gilts are also on the rise after British Chancellor Hunt reversed most of the fiscal decisions made by Prime Minister Truss in an announcement that was originally scheduled for the end of October. There is also some speculation that Prime Minister Truss could be forced out.

    • The European Commission is expected to continue discussing ways to deal with the energy crisis at a meeting on Tuesday.

    • European Central Bank policymaker Kazaks said that a 75-bps rate hike should be made in October and followed by another "big" increase in December.

U.S. equity futures:

• S&P 500 Futures: +41 @ 3,638

• DJIA Futures: +282 @ 29,990

• Nasdaq 100 Futures: +145 @ 10,890

Overseas:

• Europe: DAX +1.1%, FTSE +0.8%, CAC +0.9%

• Asia: Nikkei -1.2%, Hang Seng +0.2%, Shanghai Composite +0.4%

Commodities:

• Crude Oil +0.02 @ 85.63

• Nat Gas  -0.341 @ 6.112

• Gold +14.90 @ 1663.80

• Silver +0.439  @ 18.510

• Copper +0.0260 @ 3.4495

U.S. Summary:

• Earnings/Guidance:

  • Bank of America (BAC) beats by $0.03, beats on revs

  • BNY Mellon (BK) beats by $0.13, beats on revs

  • Hain Celestial (HAIN) reaffirms FY23 guidance

  • Turning Point Brands (TPB) sees Q3 revs above consensus; updates FY22 outlook

  • Wipro (WIT) reports SepQ results; revenue grows 14.6% yr/yr

• News:

  • UK Finance Minister Jeremy Hunt says UK will reverse prior mini-budget; basic rate of income tax will remain at 20%; will no longer cut dividend tax; measures will raise GBP 32 billion

  • Chinese President Xi reaffirmed zero coronavirus policy and is aiming to achieve peaceful unification with Taiwan but won't rule out use of force if necessary, according to New York Times

  • Russia used Iranian drones to attack Kyiv, according to New York Times

  • President Biden doesn't plan changes to Saudi relations until Congress returns from recess. Options include reexamining arms sales to the kingdom, according to CNN

  • EU aiming to propose temporary ceiling for gas prices, according to FT

  • Revenue from coronavirus vaccines expected to fall as demand declines, according to FT

  • Apple (AAPL) aiming to introduce new M2 iPad Pro., according to Bloomberg

  • Apple (AAPL) aiming to put on hold memory chips from China's Yangtze Memory Technologies, according to Nikkei

  • Array Tech (ARRY) COO Kenneth Stacherski provided notice of his intention to resign from his positions as an officer and employee of the Company and its subsidiaries, effective as of October 21, 2022

  • Biogen (BIIB) announces 3-month extension of review period for company's NDA for tofersen; new PDUFA action date set by the FDA is April 25, 2023

  • Broadcom (AVGO) aiming to ask EU for early approval for VMWare (VMW) deal, according to Reuters

  • Credit Suisse (CS) settles RMBS Legacy Case

  • Fox Corporation (FOXA) forms special committee to begin exploring a potential combination with News Corporation (NWSA)

  • GlaxoSmithKline (GSK) receives FDA approval for new presentation of Menveo

  • Goldman Sachs (GS) aiming to combine investment banking and trading units, according to The Wall Street Journal

  • Green Dot (GDOT) appoints George Gresham as Chief Executive Officer and President

  • Meta (META) struggling with metaverse transition. according to The Wall Street Journal

  • Mitsubishi Financial (MUFG) receives approval from the U.S. Federal Banking Regulators for the sale of MUFG Union Bank to U.S. Bancorp (USB)

  • News Corp. (NWSA) confirms receipt of letters from Rupert Murdoch regarding potential combination with Fox

  • Nikola Corporation (NKLA) founder and former-CEO Trevor Milton convicted by U.S. jury of fraud, according to Reuters

  • Relmada Therapeutics (RLMD): Point72 Asset Management increases passive stake to 7.3% (prior ~4.4%)

  • Trump Media (DWAC) employee says company allegedly broke securities laws, according to Washington Post

  • Turning Point Brands (TPB) appoints Graham Purdy as CEO

  • Twitter (TWTR): Elon Musk will have total control of TWTR after acquisition, according to The Information

  • Verona Pharma (VRNA) secures debt financing of up to $150 mln from Oxford Finance

  • Washington REIT (WRE) has changed its name and rebranded as Elme Communities

• M&A:

  • Archaea Energy (LFG) to be acquired by bp (BP) for ~$4.1 bln

  • Blockchain Moon Acquisition Corp (BMAQ) and DLTx ASA announce business combination

  • Continental Resources (CLR) to be acquired by the Hamm Family for $74.28 per share in stock deal

  • ESAB Corp. (ESAB) acquired Ohio Medical from a private investor group for a cash purchase price of $127 million

  • Summit Midstream Partners (SMLP) to acquire Outrigger DJ Midstream LLC and Sterling Energy Investments LLC, Grasslands Energy Marketing LLC and Centennial Water Pipelines LLC for $305 mln cash

• Syndicate: 

  • Biomea Fusion (BMEA) files $350 mln mixed securities shelf offering

  • Essential Utilities (WTRG) entered into sales agreements for up to $500 mln common stock to be offered and sold from time to time through the Sales Agents

  • Syros Pharmaceuticals (SYRS) files for 27,627,824 share common stock offering by selling shareholders

• IPOs:

  • Expected to Price:

    • No IPOs expected.

Gapping Up/Down

• Gapping up:

  • MIST +35.9%, NWSA +6.2%, CS +2.5%, GSK +2%, UBER +1.7%, IWM +1.6%, QQQ +1.4%, USB +1.3%, SPY +1.2%, DIA +1%, TLT +0.8%, BKSY +0.7%, USO+0.6%, WIT +0.5%

• Gapping down:

  • FOXA -2.7%, HAIN -2.1%, CLVS -1.9%, BMEA -1.7%, VXX -1.7%, SPB -1.1%, MUFG -0.7%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • Church & Dwight (CHD) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt $82

  • Clorox (CLX) upgraded to Equal-Weight from Underweight at Morgan Stanley; tgt $130

  • Cloudflare (NET) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $65

  • First Republic Bank (FRC) upgraded to Strong Buy from Mkt Perform at Raymond James; tgt $143

  • FirstCash (FCFS) upgraded to Neutral from Underperform at Credit Suisse; tgt raised to $88

  • Prologis (PLD) upgraded to Sector Outperform from Sector Perform at Scotiabank; tgt lowered to $116

  • Radian Group (RDN) upgraded to Outperform from Mkt Perform at Keefe Bruyette; tgt lowered to $25

• Downgrades:

  • Albertsons (ACI) downgraded to Neutral from Buy at Guggenheim

  • Edgewell Personal Care (EPC) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt lowered to $36

  • Kroger (KR) downgraded to Neutral from Buy at Northcoast

  • Lloyds Banking (LYG) downgraded to Equal-Weight from Overweight at Morgan Stanley

  • Westlake Corporation (WLK) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $95

  • XPO Logistics (XPO) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $50

  • Ero Copper (ERO) downgraded to Equal Weight from Overweight at Barclays

  • Fox Corporation (FOXA) downgraded to Hold from Buy at Loop Capital; tgt lowered to $34

  • Fox Corporation (FOXA) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $36

  • Hims & Hers Health (HIMS) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $6

  • Hudbay Minerals (HBM) downgraded to Equal Weight from Overweight at Barclays

  • News Corp. (NWSA) downgraded to Hold from Buy at Loop Capital; tgt lowered to $17

  • NMI Hldgs (NMIH) downgraded to Mkt Perform from Outperform at Keefe Bruyette; tgt lowered to $23

  • Opendoor Technologies (OPEN) downgraded to Sell from Neutral at Goldman; tgt lowered to $2

  • Terreno Realty (TRNO) downgraded to Sector Perform from Sector Outperform at Scotiabank; tgt lowered to $54

• Others:

  • Aehr Test Systems (AEHR) initiated with an Outperform at William Blair

  • Apple (AAPL) named Top Pick at Morgan Stanley

  • Ashland (ASH) named Catalyst Call Buy Idea at Deutsche Bank

  • Avient (AVNT) initiated with a Buy at Deutsche Bank; tgt $40

  • Digital Turbine (APPS) initiated with a Buy at BofA Securities; tgt $24

  • Lyell Immunopharma (LYEL) initiated with a Buy at H.C. Wainwright; tgt $12

  • PPG Industries (PPG) initiated with an Overweight at KeyBanc Capital Markets; tgt $127

  • Proterra (PTRA) initiated with a Buy at BTIG Research; tgt $7

  • Applied Materials (AMAT) initiated with a Mkt Perform at William Blair

  • CDW (CDW) placed on Tactical Outperform List at Evercore ISI

  • Coherent (COHR) initiated with a Mkt Perform at William Blair

  • CTI BioPharma (CTIC) initiated with an Outperform at SVB Leerink; tgt $13

  • IGM Biosciences (IGMS) initiated with a Neutral at JP Morgan; tgt $27

  • Livent (LTHM) initiated with a Neutral at JP Morgan; tgt $28

  • Loop Media (LPTV) initiated with a Buy at ROTH Capital; tgt $6.50

  • ON Semiconductor (ON) initiated with an Outperform at William Blair

  • Orocobre (OROCF) initiated with a Sector Perform at RBC Capital Mkts

  • Prologis (PLD) resumed with an Overweight at Morgan Stanley; tgt $120

  • Sensata Tech (ST) placed on Tactical Outperform List at Evercore ISI; tgt $46

  • STMicroelectronics (STM) initiated with a Mkt Perform at William Blair

  • Sunnova Energy (NOVA) initiated with a Positive at Susquehanna; tgt $38

  • SunPower (SPWR) initiated with a Positive at Susquehanna; tgt $25

  • TPG Inc. (TPG) initiated with a Hold at Jefferies; tgt $30

  • Wolfspeed (WOLF) initiated with an Outperform at William Blair

Upcoming Events:

• Econ Data:

  • 08:30 ET: October Empire State Manufacturing Index (Briefing.comconsensus -4.5; Prior -1.5)

• Earnings

  • Monday (Oct 17)

    • Morning: BAC BK SCHW

    • Afternoon:  ELS MRTN

  • Tuesday (Oct 18)

    • Morning: ACI CBSH GS HAS JNJ LMT SBNY SI STT TFC

    • Afternoon:  FNB FHN FULT HWC IBKR ISRG JBHT NFLX OMC PNFP UAL UCBI WTFC

  • Wednesday (Oct 19)

    • Morning: ABT ALLY ASML BMI BKR CFG CMA ELV HCSG LAD MTB MKTX NDAQ NTRS PG PLD SCL TRV UNF WGO

    • Afternoon: AA CNS CCI CVBF EFX FR IBM KALU KMI KNX LRCX LSTR LBRT PACW PPG REXR RLI SLG STLD TSLA TCBI UMPQ WDFC

  • Thursday (Oct 20) 

    • Morning:  ABB ALK AAL T AUB BANC BKU BHLB BX COLB DHR DOV DOW EWBC ERIC FITB FCX GPC HRI HOMB IRDM KEY LNN MAN MMC MSM NOK NUE PPBI PM POOL DGX SASR SNA SNV TSCO UNP WSO WBS WNS

    • Afternoon: ASB OZK BJRI SAM BDN CSX EEFT FFBC GBCI HTH RHI SNAP SIVB THC UFPI WAL WHR

  • Friday (Oct 21)

    • Morning: AXP ALV HCA HBAN IPG RF SLB SXT SMPL VZ

    • Afternoon: None

Asia & Europe detail:

Asia: Nikkei -1.2%, Hang Seng +0.2%, Shanghai Composite +0.4%

Equity indices in the Asia-Pacific region began the week on a mostly higher note. Japan's Finance Minister Suzuki said that the G-20 has a shared understanding over currency volatility and repeated that excessive speculative moves will be countered. The approval rating of Japan's cabinet has dropped to 33.1%, according to ANN. Bank of Japan Governor Kuroda said that inflation is expected to continue accelerating into the end of 2022 but is expected to return below 2.0% in FY23/24. Policymakers at the Bank of Korea reportedly expect a terminal rate above 3.50%. China will reportedly delay the release of its Q3 growth figures.

• In economic data:

  • Japan's August Industrial Production 3.4% m/m (expected 2.7%; last 2.7%) and Capacity Utilization 1.2% m/m (last 2.4%). August Tertiary Industry Activity Index 0.7% m/m (expected 0.3%; last -0.5%)

  • South Korea's September trade deficit $3.78 bln (last deficit of $3.70 bln). September Imports 18.6% yr/yr (last 18.6%) and Exports 2.7% yr/yr (last 2.8%)

  • Singapore's September trade surplus SGD5.75 bln (last surplus of SGD3.738 bln). September non-oil exports -4.0% m/m (expected -2.1%; last -3.9%); 3.1% yr/yr (expected 7.1%; last 11.4%)

---Equity Markets---

• Japan's Nikkei: -1.2%

• Hong Kong's Hang Seng: +0.2%

• China's Shanghai Composite: +0.4%

• India's Sensex: +0.9%

• South Korea's Kospi: +0.3%

• Australia's ASX All Ordinaries: -1.4%

---FX---

• USD/JPY: +0.1% to 148.87

• USD/CNH: +0.3% to 7.2151

• USD/INR: UNCH at 82.29

Europe: DAX +1.1%, FTSE +0.8%, CAC +0.9%

Major European indices trade in the green. The British pound is climbing against the dollar and Gilts are also on the rise after British Chancellor Hunt reversed most of the fiscal decisions made by Prime Minister Truss in an announcement that was originally scheduled for the end of October. There is also some speculation that Prime Minister Truss could be forced out. The European Commission is expected to continue discussing ways to deal with the energy crisis at a meeting on Tuesday. European Central Bank policymaker Kazaks said that a 75-bps rate hike should be made in October and followed by another "big" increase in December.

• In economic data:

  • Italy's September CPI 0.3% m/m, as expected (last 0.8%); 8.9% yr/yr, as expected (last 8.4%)

---Equity Markets---

• STOXX Europe 600: +0.9%

• Germany's DAX: +1.1%

• U.K.'s FTSE 100: +0.8%

• France's CAC 40: +0.9%

• Italy's FTSE MIB: +1.0%

• Spain's IBEX 35: +1.7%

---FX---

• EUR/USD: +0.3% to 0.9748

• GBP/USD: +1.1% to 1.1301

• USD/CHF: -0.4% to 1.0014