24/10/22 Briefing

The S&P 500 futures are up 32 points and are trading 0.9% above fair value. The Nasdaq 100 futures are up 69 points and are trading 0.7% above fair value. The Dow Jones Industrial Average futures are up 285 points and are trading 0.9% above fair value.

Equity futures are moving higher this morning, fueled by carryover upside momentum from last week's turnaround effort. Global bond markets are also behaving better, acting as another upside driving force.

The UK gilt is down 26 basis points to 3.80% with growing expectations that Rishi Sunak will be elected Prime Minister and amid reports that Finance Minister Hunt is looking to potentially raise taxes. 

The 2-yr Treasury note yield is down four basis points to 4.46% and the 10-yr note yield is down five basis points to 4.17%.

Germany and the U.K. reported weaker than expected flash Manufacturing PMI readings for October while Services readings from France and the U.K. also missed expectations.

There is notable weakness in Chinese stocks. Hong Kong's Hang Seng dropped more than 6.0%. This comes after President Xi was elected to a third term, fueling worries about the state tightening control over the economy and carrying on with its zero Covid policy. 

U.S. economic data is limited to the preliminary IHS Markit Manufacturing PMI (prior 52.0) and Services PMI (prior 49.3) for October.

In corporate news:

• Meta Platforms (META 128.78 -1.23 -0.95%): downgraded to Neutral from Buy at Bank of America

• Wolfspeed (WOLF 110.50 +4.73 +4.47%): upgraded to Overweight from Neutral at JPMorgan

• Tesla (TSLA 210.29 -4.15 -2.2%): lowering China prices, according to Bloomberg; discloses that YTD it recorded $170 million of impairment losses resulting from changes to the carrying value of its bitcoin and gains of $64 million on certain conversions of bitcoin into fiat currency

• SLB (SLB 50.29 -0.12 -0.24%): Schlumberger announced its new name-SLB

• KraneShares CSI China Internet ETF (KWEB 18.79 -2.66 -12.40%): Chinese stocks are being hit hard with President Xi concentrating power over the weekend

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region began the week on a mixed note while markets in India, New Zealand, and Singapore were closed for holidays. Japan's Nikkei: +0.3%, Hong Kong's Hang Seng: -6.4%, China's Shanghai Composite: -2.0%, India's Sensex: CLOSED, South Korea's Kospi: +1.0%, Australia's ASX All Ordinaries: +1.6%.

  • In economic data:

    • China's September Retail Sales 2.5% yr/yr (expected 3.3%; last 5.4%), September Industrial Production 6.3% yr/yr (expected 4.5%; last 4.2%), September Fixed Asset Investment 5.9% yr/yr (expected 6.0%; last 5.8%), and September House Prices -1.5% yr/yr (last -1.3%). September trade surplus $84.74 bln (expected $81.00 bln; last $79.39 bln). September Exports 5.7% yr/yr (expected 4.1%; last 7.1%) and Imports 0.3% yr/yr (expected 1.0%; last 0.3%). Q3 GDP 3.9% qtr/qtr (expected 3.5%; last -2.7%); 3.9% yr/yr (expected 3.4%; last 0.4%). September Unemployment Rate 5.5% (expected 5.2%; last 5.3%)

    • Japan's flash October Manufacturing PMI 50.7 (expected 51.3; last 50.8) and flash Services PMI 53.0 (last 52.2)

    • Australia's flash October Manufacturing PMI 52.8 (last 53.5) and flash Services PMI 49.0 (last 50.6)

  • In news:

    • Hong Kong's Hang Seng fell more than 6.0% with property and technology names leading the retreat.

    • FT speculated that Japan spent more than $30 bln to intervene in the currency market last week.

    • China's President Jinping started his third term. South Korea is facing a potential union worker strike at three shipyards.

• Major European indices trade in the green. STOXX Europe 600: +1.3%, Germany's DAX: +1.3%, U.K.'s FTSE 100: +0.4%, France's CAC 40: +1.5%, Italy's FTSE MIB: +1.4%, Spain's IBEX 35: +1.7%.

  • In economic data:

    • Eurozone's October flash Manufacturing PMI 46.6 (expected 47.8; last 48.4) and flash Services PMI 48.2, as expected (last 48.8)

    • Germany's October flash Manufacturing PMI 45.7 (expected 47.0; last 47.8) and flash Services PMI 44.9 (expected 44.7; last 45.0)

    • U.K.'s October flash Manufacturing PMI 45.8 (expected 48.0; last 48.4) and flash Services PMI 47.5 (expected 49.6; last 50.0)

    • France's October flash Manufacturing PMI 47.4 (expected 47.1; last 47.7) and flash Services PMI 51.3 (expected 51.5; last 52.9)

  • In news:

    • Boris Johnson withdrew his name from consideration for leader of the U.K.'s Conservative party, making Rishi Sunak a favorite to win the job.

    • Moody's lowered the U.K.'s outlook to "negative" from "stable."

    • The Bank of England plans to hold eight $750 mln bond sales between November 1 and December 31.

    • Workers at the port of Liverpool began a strike that is expected to last two weeks.

    • Germany and the U.K. reported weaker than expected flash Manufacturing PMI readings for October while Services readings from France and the U.K. also missed expectations.

U.S. equity futures:

• S&P 500 Futures: +32 @ 3,785

• DJIA Futures: +281 @ 31,364

• Nasdaq 100 Futures: +69 @ 11,379

Overseas:

• Europe: DAX +1.3%, FTSE +0.4%, CAC +1.5%

• Asia: Nikkei +0.3%, Hang Seng -6.4%, Shanghai Composite -2.0%

Commodities:

• Crude Oil -0.88 @ 84.17

• Nat Gas  -0.015 @ 5.457

• Gold -2.70 @ 1653.60

• Silver +0.146  @ 19.212

• Copper -0.0260 @ 3.4485

U.S. Summary:

• Earnings/Guidance:

  • Bank of Hawaii (BOH) reports Q3 (Sep) results

  • Community Bank (CBU) beats by $0.33, beats on revs

  • Dorma n Products (DORM) beats by $0.02, beats on revs; guides FY22 EPS below consensus, revs in-line

  • HNI (HNI) beats by $0.86, misses on revs

  • Kirby (KEX) beats by $0.06, beats on revs

  • Pearson Plc (PSO) reports 9-month trading update; sales up 7% yr/yr; reaffirms outlook

  • Philips (PHG) beats by 0.16, misses on revs

  • POSCO (PKX) reports Q3 EPS of KRW 7800 vs. KRW 34,745 last year; revs KRW 21.155 trillion vs. KRW 21.015 trillion Capital IQ consensus

• News:

  • Midterm election polling for House & Senate continue to show improvements for Republicans amid voter concerns about economy and crime, according to the Washington Post

  • Republicans will likely use vote on debt ceiling to force spending reductions if they win House majority, according to The Hill

  • Rishi Sunak has a clear path to become UK Prime Minister after Boris Johnson pulls out of the race, according to the New York Times

  • China reshuffled leadership, but market oriented leader Wang Yang was not included in the central committee of the Communist Party, CNBC

  • Moody's on Friday nightchanged the outlook on the UK to negative, affirms Aa3 ratings

  • Two thirds of NABE respondents say US is in recession or will be in one in 2023, according to Bloomberg

  • Federal Appeals Court temporarily blocks President Biden's student loan relief program, according to theNew York Times

  • Oil producers are skeptical of President Biden's plan to refill oil reserves, according to the Wall Street Journal

  • NASDAQ halts listings of smaller Chinese companies, according to the Wall Street Journal

  • AbbVie (ABBV): RINVOQ receives its sixth U.S. FDA approval

  • Accelerate Diagnostics (AXDX) discloses that the FDA clarified that company must obtain 510(k) clearance to continue marketing and distribute Accelerate Arc Products in U.S. -- 8-K filing

  • AstraZeneca (AZN) reports Imjudo (tremelimumab) in combination with Imfinzi approved in the US for patients with unresectable liver cancer

  • AstraZeneca's (AZN) IMJUDO in combination with IMFINZI has been approved in the US for the treatment of adult patients with unresectable hepatocellular carcinoma

  • AstraZeneca (AZN): Breztri Aerosphere now available in Canada for long-term maintenance treatment of COPD

  • Beyond Air (XAIR) announces positive data for inhaled nitric oxide to treat COVID-19 with LungFit PRO in a poster presentation at IDWeek 2022

  • Boeing (BA): Saudi Wealth Fund is in discussions with Boeing and Airbus (EADSY) for order of 80 jets, according to Bloomberg

  • Boeing (BA): Judge rules that Boeing 737 Max criminal settlement can be challenged, according to the Wall Street Journal

  • Bristol-Myers (BMY): Presented at the American College of Gastroenterology Annual Scientific Meeting demonstrate continuous zeposia (ozanimod) treatment prevents disease relapse over one year in 86.1% of patients who respond at the end of the induction period

  • Credit Suisse (CS) settles French legacy case

  • Credit Suisse (CS) Chief Compliance Officer Rafael Lopez will leave, according to Bloomberg

  • Finance of America (FOA) to discontinue operations of its forward mortgage originations segment across retail and wholesale channels by year end

  • Gilead (GILD) Presents Real-World Evidence Reinforcing the Use of Biktarvy for the Treatment of People Living With HIV With a Range of Comorbidities

  • GlaxoSmithKline (GSK) and Pfizer's (PFE) ViiV Healthcare presents positive data showing Vocabria and Rekambys can be successfully implemented across a range of European healthcare settings

  • Hawaiian Holdings (HA) discloses select financial statements should no longer be relied upon

  • Horizon Pharma (HZNP) reports New Real-World Analysis of TEPEZZA (teprotumumab-trbw) Use Indicates a Small Percentage of People Receive a Second Course of Treatment

  • Ivanhoe Electric (IE) CEO Robert Friedland to step down, effective November 21, but will will remain as Executive Chair of the Board; Taylor Melvin appointed successor

  • Johnson & Johnson's (JNJ) Janssen unit reports new TREMFYA data showing an overall clinical response rate of approximately 80% in a Phase 2b Induction Study

  • Lockheed Martin (LMT) awarded $477 mln U.S. Army contract

  • Merck (MRK): European Commission expands Merck's Vaxneuvance indication to include infants, children and adolescents

  • Merck's (MRK) PREVYMIS Demonstrates Efficacy in Phase 3 Study for Prevention of Cytomegalovirus Disease in Adults After Kidney Transplantation

  • Meta (META) prepared to block news content in Canada, according to the Wall Street Journal

  • Middlesex Water (MSEX) increases quarterly dividend by 7.6% to $0.3125/share

  • Mueller Water (MWA) increases its quarterly dividend 5.2% to $0.061/share

  • Novartis AG (NVS) reports investigational oral monotherapy iptacopan demonstrates clinically meaningful superiority over anti-C5 treatment in Phase III APPLY-PNH study

  • Novocure (NVCR) Announces 11 Presentations on Tumor Treating Fields in Multiple Solid Tumor Types at the American Society for Radiation Oncology 2022 Annual Meeting

  • Opthea Ltd. (OPT) expands leadership team with the appointment of Timothy Morris as CFO

  • Piedmont Lithium (PLL) partner Atlantic Lithium confirms high-grade mineralization, completing drilling program for Ghana project

  • Schlumberger (SLB) announced its new name-SLB

  • Scholar Rock (SRRK) reports New Phase 2 TOPAZ Trial Data Indicate Positive Trends in Quality-of-Life Measures Over 24 Months with Apitegromab for Nonambulatory Patients with Types 2 and 3 SMA

  • Scholastic Corp's (SCHL) Board authorizes repurchase of up to $75 mln in common stock

  • Seres Therapeutics (MCRB) Presents SER-109 ECOSPOR IV Study Data at IDWeek and American College of Gastroenterology (ACG) 2022 Annual Meetings

  • Tesla (TSLA) lowering China prices, according to Bloomberg

  • Tesla discloses that YTD it recorded $170 million of impairment losses resulting from changes to the carrying value of its bitcoin and gains of $64 million on certain conversions of bitcoin into fiat currency

  • Tricida (TCDA) announces VALOR-CKD trial did not meet primary endpoint

  • TSMC (TSM) suspends work for Chinese startup Biren Technology amid US restrictions, according to Bloomberg

  • Vaxcyte (PCVX) Reports Positive Topline Data from Phase 1/2 Proof-of-Concept Study of its 24-Valent Pneumococcal Conjugate Vaccine Candidate Being Investigated for the Prevention of Invasive Pneumococcal Disease in Adults Aged 18-64

  • ViewRay (VRAY) Announces Primary Endpoint Outcome from First Prospective, Multi-Institutional Study to Deliver Ablative Doses of Radiation to Pancreatic Cancer Patients

  • Viridian (VRDN) Presents Clinical Data from Ongoing VRDN-001 Phase 1/2 Trial in Active Thyroid Eye Disease (TED) Patients During Late-Breaking Presentations at the American Thyroid Association (ATA) 91st Annual Meeting

  • Volta (VLTA) initiating a furlough program designed to reduce costs further

  • Yum China (YUMC) announces primary listing on the Hong Kong Stock Exchange and inclusion in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect

  • Zentalis Pharma (ZNTL) announces plans to initiate the first study of its collaboration with Pfizer (PFE) on Zentalis' product candidate ZN-c3, a selective Wee1 inhibitor designed to induce synthetic lethality in cancer cells

• M&A:

  • ARKO Corp. (ARKO) to acquire Pride Convenience Holdings for approx. $230 mln plus inventory values

  • Medtronic (MDT) to separate its combined Patient Monitoring and Respiratory Interventions businesses

  • Myovant Sciences (MYOV) to be acquired by Sumitovant Biopharma for $27.00 per share in cash

  • SSR Mining (SSRM) announce that it has reached an agreement to acquire an additional 30% ownership interest in the Kartaltepe mining joint venture

• Syndicate: 

  • Alpine Income Property Trust (PINE) entered into separate equity distribution agreements having an aggregate gross sales price of up to $150,000,000

  • Ascent Solar (ASTI) files $100 mln mixed securities shelf offering

  • Zymeworks (ZYME) discloses sales agreement

• IPOs:

  • Expected to Price:

    • Mobileye Global (NYSE: MBLY): The developer of advanced driver assistance systems and autonomous driving technologies is expected to price its 41.0 M share IPO between $16-$18.

Gapping Up/Down

• Gapping up:

  • PSO +8.6%, MYOV +7.6%, MWA +4.3%, NVCR +3.3%, MCRB +2.5%, SRRK +1.5%

• Gapping down:

  • YUMC -9.4%, AXDX -8.8%, PHAT -4.8%, PHG -4%, PINE -2.9%, VRDN -2.8%, HA -1.9%, HZNP -1.7%, PKX -1.6%, ASTI -0.7%

Analyst Research (see Upgrades/Downgradescalendarfor full list):

• Upgrades

  • ANSYS (ANSS) upgraded to Buy from Neutral at Rosenblatt; tgt lowered to $270

  • Avis Budget (CAR) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $231

  • ServiceNow (NOW) upgraded to Buy from Neutral at Guggenheim

• Downgrades:

  • Analog Devices (ADI) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $140

  • Danaher (DHR) downgraded to Hold from Buy at The Benchmark Company; tgt $325

  • FedEx (FDX) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $160

  • Green Plains (GPRE) downgraded to Market Perform from Outperform at BMO Capital Markets; tgt lowered to $31

  • MDU Resources (MDU) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $26

  • The Aaron's Company (AAN) downgraded to Underperform from Neutral at BofA Securities; tgt $6.50

• Others:

  • Advanced Micro (AMD) initiated with a Hold at HSBC Securities; tgt $60

  • Flywire (FLYW) initiated with a Buy at Loop Capital; tgt $25

  • Intel (INTC) initiated with a Reduce at HSBC Securities; tgt $23

  • R1 RCM (RCM) initiated with an Outperform at Evercore ISI; tgt $25

Upcoming Events:

• Econ Data:

  • 09:45 ET: IHS Markit Manufacturing PMI - Prelim for Oct (Briefing.comConsensus NA; Prior 52.0)

  • 09:45: IHS Markit Services PMI - Prelim for Oct (Briefing.comConsensus NA; Prior 49.3)

• Earnings

  • Monday (Oct 24)

    • Morning:  BOH CBU DORM HNI KEX PHG SCHN

    • Afternoon: AGNC ARE BRO CADE CDNS CALX CATY CLS CR CCK DFS HSTM HXL HOPE IBTX LOGI MEDP NWE PKG PCH XM RRC SSD SSB AAN TBI WRB WSFS ZION

  • Tuesday (Oct 25)

    • Morning: MMM ADM ARCC AWI BIIB CNC CLF KO GLW FBP FELE GATX GE GM GPK HAL HUBB ITW IVZ JBLU KMB LKFN MCO MSCI NVS NVR ONB PCAR PNR PII POR PHM RTX SAP ST SHW SSTK SFNC SITC SBSI SYF TRU TRN UBS UPS VLO XRX

    • Afternoon:  AGYS GOOG AMP AGR AXTA BXP BYD CNI CHX CC CMG CB CSGP EGP WIRE ENPH EQC EQR FFIV FCF FIBK FE HA HIW IEX JNPR KRC LXFR MANH MTDR MAT MXL MSFT NAVI NCR NXGN NEX RNST ROIC SKX SPOT LRN TENB TER TXN TNET TRMK UMBF UHS VBTX VICR V WSBC WH

Asia & Europe detail:

Asia: Nikkei +0.3%, Hang Seng -6.4%, Shanghai Composite -2.0%

Equity indices in the Asia-Pacific region began the week on a mixed note while markets in India, New Zealand, and Singapore were closed for holidays. Hong Kong's Hang Seng fell more than 6.0% with property and technology names leading the retreat. FT speculated that Japan spent more than $30 bln to intervene in the currency market last week. China's President Jinping started his third term. South Korea is facing a potential union worker strike at three shipyards.

• In economic data:

  • China's September Retail Sales 2.5% yr/yr (expected 3.3%; last 5.4%), September Industrial Production 6.3% yr/yr (expected 4.5%; last 4.2%), September Fixed Asset Investment 5.9% yr/yr (expected 6.0%; last 5.8%), and September House Prices -1.5% yr/yr (last -1.3%). September trade surplus $84.74 bln (expected $81.00 bln; last $79.39 bln). Q3 GDP 3.9% qtr/qtr (expected 3.5%; last -2.7%); 3.9% yr/yr (expected 3.4%; last 0.4%). September Unemployment Rate 5.5% (expected 5.2%; last 5.3%)

  • Japan's flash October Manufacturing PMI 50.7 (expected 51.3; last 50.8) and flash Services PMI 53.0 (last 52.2)

  • Australia's flash October Manufacturing PMI 52.8 (last 53.5) and flash Services PMI 49.0 (last 50.6)

---Equity Markets---

• Japan's Nikkei: +0.3%

• Hong Kong's Hang Seng: -6.4%

• China's Shanghai Composite: -2.0%

• India's Sensex: CLOSED

• South Korea's Kospi: +1.0% 

• Australia's ASX All Ordinaries: +1.6%

---FX---

• USD/JPY: +1.2% to 149.34

• USD/CNH: +1.1% to 7.3042

• USD/INR: +0.4% to 82.81

Europe: DAX +1.3%, FTSE +0.4%, CAC +1.5%

Major European indices trade in the green. Boris Johnson withdrew his name from consideration for leader of the U.K.'s Conservative party, making Rishi Sunak a favorite to win the job. Moody's lowered the U.K.'s outlook to "negative" from "stable." The Bank of England plans to hold eight $750 mln bond sales between November 1 and December 31.Workers at the port of Liverpool began a strike that is expected to last two weeks. Germany and the U.K. reported weaker than expected flash Manufacturing PMI readings for October while Services readings from France and the U.K. also missed expectations.

• In economic data:

  • Eurozone's October flash Manufacturing PMI 46.6 (expected 47.8; last 48.4) and flash Services PMI 48.2, as expected (last 48.8)

  • Germany's October flash Manufacturing PMI 45.7 (expected 47.0; last 47.8) and flash Services PMI 44.9 (expected 44.7; last 45.0)

  • U.K.'s October flash Manufacturing PMI 45.8 (expected 48.0; last 48.4) and flash Services PMI 47.5 (expected 49.6; last 50.0)

  • France's October flash Manufacturing PMI 47.4 (expected 47.1; last 47.7) and flash Services PMI 51.3 (expected 51.5; last 52.9)

---Equity Markets---

• STOXX Europe 600: +1.3%

• Germany's DAX: +1.3%

• U.K.'s FTSE 100: +0.4%

• France's CAC 40: +1.5%

• Italy's FTSE MIB: +1.4%

• Spain's IBEX 35: +1.7%

---FX---

• EUR/USD: -0.4% to 0.9821

• GBP/USD: -0.2% to 1.1278

• USD/CHF: +0.5% to 1.0024