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Morning Briefing 18/10/21

Morning Briefing - Futures point to modest losses on renewed inflation and growth concerns

The S&P 500 futures trade four points, or 0.1%, below fair value following a three-day rebound rally last week. Risk sentiment has been pressured in part by developments overseas. Briefly, China reported below-consensus Q3 GDP growth, Dutch health technology company Philips (PHG 43.63, -0.94, -2.1%) cut its full-year outlook because of the global chip shortage, and Bank of England Governor Bailey reportedly said the central bank will "have to act" on rising inflation pressures. The Fed-sensitive 2-yr Treasury note yield is up four basis points to 0.44% while the 10-yr yield is up two basis points to 1.60%. The U.S. Dollar Index is up 0.1% to 94.06. WTI crude futures are up another 1.5%, or $1.27, to $83.55/bbl amid well-known supply constraints. In other developments, the $150 billion clean electricity program will likely be removed from the reconciliation bill, according to The New York Times; Walt Disney (DIS 173.40, -3.06, -1.7%) was downgraded to Equal Weight from Overweight at Barclays; and Apple (AAPL 144.66, -0.18, -0.1%) will host a product event at 1:00 p.m. ET. On the data front, investors will receive Industrial Production ( consensus 0.2%) and Capacity Utilization ( consensus 76.5%) for September at 9:15 a.m. ET, the NAHB Housing Market Index for October ( consensus 75.0) at 10:00 a.m. ET, and Net Long-Term TIC Flows for August at 4:00 p.m. ET. In U.S. Corporate news:

  • Apple (AAPL 144.66, -0.18): -0.1% ahead of its product event at 1:00 p.m. ET. The company is expected to introduce AirPods 3 and new MacBook Pro laptops.

  • Walt Disney (DIS 173.40, -3.06): -1.7% after the stock was downgraded to Equal Weight from Overweight at Barclays.

  • Zillow Group (ZG 88.97, -5.33): -5.7% after Bloomberg reported that the company has temporarily stopped purchasing new homes.

  • Albertsons (ACI 30.00, +1.44): +5.0% after beating top and bottom-line estimates, raising its FY22 EPS above consensus, and increasing its quarterly dividend by two cents to $0.12/share.

  • State Street (STT 93.75, +1.02): +1.1% after beating EPS estimates.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region began the week on a mostly higher note. Japan's Nikkei: +1.7% Hong Kong's Hang Seng: +0.3% China's Shanghai Composite: -0.1% India's Sensex: +0.8% South Korea's Kospi: -0.3% Australia's ASX All Ordinaries: +0.2%.

    • In economic data:

      • China's Q3 GDP 0.2% qtr/qtr (expected 0.5%; last 1.2%); 4.9% yr/yr (expected 5.2%; last 7.9%). September Industrial Production 3.1% yr/yr (expected 4.5%; last 5.3%), September Retail Sales 4.4% yr/yr (expected 3.3%; last 2.5%), September Fixed Asset Investment 7.3% yr/yr (expected 7.9%; last 8.9%), and September Unemployment Rate 4.9% (last 5.1%)

      • Singapore's September trade surplus SGD4.999 bln (last surplus of SGD6.253 bln). September non-oil exports 1.2% m/m (expected 2.4%; last -3.5%); 12.3% yr/yr (expected 9.6%; last 2.7%)

      • New Zealand's Q3 CPI 2.2% qtr/qtr (expected 1.4%; last 1.3%); 4.9% yr/yr (expected 4.1%; last 3.3%)

  • In news:

    • China reported weaker than expected growth for Q3 as industrial production undershot estimates, but officials continue expecting that targets for the full year will be met.

    • Japan's Prime Minister Kishida said that there are no plans to raise the consumption tax at this time and that he will urge oil producing countries to raise output.

    • The grace period on Evergrande's first missed bond payment will expire on Saturday.

  • Major European indices trade in the red. STOXX Europe 600: -0.5% Germany's DAX: -0.6% U.K.'s FTSE 100: -0.2% France's CAC 40: -0.8% Italy's FTSE MIB: -0.8% Spain's IBEX 35: -0.6%.

    • There was no notable data

    • In news:

      • Bank of England Governor Bailey said that the BoE's intent to fight inflation has been signaled already and that upcoming monetary policy meetings will be used to act.

      • European Central Bank President Lagarde repeated the ECB's view that the spike in inflation is transitory.

      • French Finance Minister Le Maire acknowledged that high energy prices could impact growth and tax revenue.

U.S. equity futures:

  • S&P 500 Futures: -14 @ 4,458

  • DJIA Futures: -122 @ 35,173

  • Nasdaq 100 Futures: -32 @ 15,115


  • Europe: DAX -0.6%, FTSE -0.2%, CAC -0.8%

  • Asia: Nikkei +1.7%, Hang Seng +0.3%, Shanghai Composite -0.1%


  • Crude Oil +1.08 @ 82.81

  • Nat Gas -0.138 @ 5.272

  • Gold -6.60 @ 1761.70

  • Silver -0.114 @ 23.235

  • Copper +0.0250 @ 4.7544

U.S. Summary:

  • Earnings/Guidance (Full Earnings Calendar):

    • Albertsons (ACI) beats by $0.19, beats on revs; raises FY22 EPS above consensus

    • LHC Group (LHCG) sees Q3 EPS and revs below consensus; lowers FY21 outlook

    • Philips (PHG) beats by 0.11, misses on revs

    • State Street (STT) beats by $0.04, reports revs in-line

  • General News:

    • The $150 billion clean electricity program, which would have replaced coal and gas plants with renewable energy, will likely be eliminated from reconciliation bill due to opposition from Senator Joe Manchin (D-WV), according to the New York Times

    • Some Democrats are considering a carbon tax as an alternative to clean electricity program, but it's unclear if Senator Joe Manchin (D-WV) will support that, according to the New York Times

    • Transportation Secretary Pete Buttigieg says supply chain issues are likely to last into next year, according to CNN

    • Energy crisis is being caused by drop in fossil fuel investment and renewables that are not ready, according to the Wall Street Journal

    • Hollywood workers reach deal and avert strike, according to the New York Times

    • Adamis Pharma (ADMP) announces that the U.S. Food and Drug Administration has approved Adamis' ZIMHI 5 mg/0.5 mL product

    • Albertsons (ACI) increases quarterly dividend to $0.12/share from $0.10/share

    • Alibaba (BABA) is losing market share, according to the Wall Street Journal

    • Apple (AAPL) to introduce AirPods 3 and new MacBook Pro laptops today, according to MacRumors

    • Applied Therapeutics (APLT) reports additional pediatric biomarker data from ACTION-Galactosemia Kids

    • Avadel Pharmaceuticals (AVDL) notified by FDA that review of NDA for FT218 is still ongoing

    • Biogen (BIIB) and Ionis report Tofersen Phase 3 study did not meet primary endpoint

    • BioXcel Therapeutics (BTAI) announces expansion of Phase 2 trial of BXCL701 in de novo and treatment-emergent small-cell neuroendocrine prostate cancer

    • Boeing (BA) workers are protesting against vaccination mandate, according to Reuters

    • Cabaletta Bio (CABA) Announces Presentation of Preclinical Data Supporting PLA2R-CAART as a Potential Precision Therapy for Antigen-Specific B Cell Depletion in PLA2R Membranous Nephropathy at ASN Kidney Week 2021

    • ChromaDex (CDXC) reports first clinical study findings on Nicotinamide Riboside in children

    • Cullinan Management (CGEM) appoints Nadim Ahmed as CEO effective today

    • Esperion Therapeutics (ESPR) announces plan to enable future growth

    • Facebook (FB) aiming to hire 10,000 people in EU over 5 years, according to Reuters

    • FEMSA (FMX) CEO Eduardo Padilla to retire effective January 1, 2022

    • Ford Motor (F) to invest $316 mln to make EV parts in UK, according to Bloomberg

    • General Electric (GE) awarded $270 mln Navy contract

    • Gilead Sciences (GILD): FDA approves expanded indication for Biktarvy for HIV-1 treatment

    • Goldman Sachs (GS) gets approval to own China unit, according to the Wall Street Journal

    • Google (GOOG) aiming to introduce Pixel 6 smartphone tomorrow, according to Engadget

    • HEXO (HEXO) announces the departure of Sebastien St-Louis, Co-Founder and Chief Executive Officer, effective immediately, as the Company completes a strategic reorganization

    • Johnson & Johnson (JNJ) confirms unanimous recommendation for EUA for COVID-19 vaccine booster shot by FDA advisory committee

    • Lennar (LEN) increases stock repurchase authorization to $1.0 bln

    • Lipocine (LPCN) and Antares Pharma (ATRS) enter exclusive licensing agreement to commercialize TLANDO in the U.S.

    • Mannkind (MNKD) provides up on Tyvaso DPI NDA

    • Marathon (MPC): California's Contra Costa County will likely request that Marathon and Phillips (PSX) reduce capacity, according to Reuters

    • Netflix (NFLX) "Squid Game" could be worth $900 mln, according to Bloomberg

    • Novavax (NVAX) reports COVID-19 vaccine developed by Valneva met both co-primary endpoints

    • Omeros (OMER) receives complete response letter from FDA for biologics license application for narsoplimab in the treatment of HSCT-TMA

    • Oyster Point Pharma (OYST) announces FDA approval of TYRVAYA nasal spray for the treatment of the signs and symptoms of dry eye disease

    • Pfizer (PFE): FDA weighs lowering recommended age for recipients of Pfizer/BioNTech (BNTX) COVID-19 vaccine booster shots, according to Reuters

    • Pfizer (PFE) and Moderna (MRNA) will likely double vaccine sales in 2022, according to Financial Times

    • Phathom Pharmaceuticals (PHAT) announces positive topline results from PHALCON-EE pivotal phase 3 erosive esophagitis trial

    • Revance Therapeutics (RVNC) receives Complete Response letter for BLA for DaxibotulinumtoxinA for Injection for the treatment of moderate to severe glabellar lines

    • Sinclair Broadcast (SBGI) updates investors on cyber security incident

    • Square (SQ) CEO Jack Dorsey tweeted "Square is considering building a Bitcoin mining system based on custom silicon and open source for individuals and businesses worldwide"

    • Telsa (TSLA): Michael Burry is no longer short Tesla, according to CNBC

    • Tencent (TCEHY) China considering plan to open TCEHY to search, according to Bloomberg

    • Tesla (TSLA) has resumed delivering its full lineup of cars, according to Electrek

    • Toyota Motor (TM) announces that it will invest approximately $3.4 billion (380 billion yen) in automotive batteries in the United States through 2030

    • Uber (UBER) and Careem could face $100 mln in tax bills from Saudi Arabia, according to Bloomberg

    • United Therapeutics (UTHR) provides an update on the progress of the Tyvaso DPI new drug application

    • Vertex Pharma (VRTX) announced positive Day 90 data for the first patient from the Phase 1/2 clinical trial of VX-880

    • Zillow (Z, ZG) has paused home purchases, according to Bloomberg

  • M&A:

    • Akoustis Technologies (AKTS) announces that it is acquiring a 51% majority ownership position of RFM Integrated Device, with the right to purchase the remaining 49% in 2022

    • Blue Owl Capital (OWL) has entered into a definitive merger agreement to acquire Oak Street Real Estate Capital and its investment advisory business

    • CDW (CDW) entered into a definitive agreement to acquire Sirius Computer Solutions from an affiliate of Clayton, Dubilier & Rice for $2.5 billion in cash

  • Syndicate:

    • Hertz Global (HTZZ) files registration statement for public offering of common stock by selling stockholders; announces intention to apply to list stock on the Nasdaq

  • IPOs:

    • Expected to Price:

      • Aris Water Solutions (NYSE: ARIS): The environmental infrastructure and solutions company that helps customers reduce their water and carbon footprints is expected to price its 17.7 M share IPO between $16-18.

      • Enfusion (NYSE: ENFN): The SaaS provider focused on transforming the investment management industry is expected to price its 18.8 M share IPO between $15-$17.

      • P10, Inc. (NYSE: PX): The multi-asset class private market solutions provider in the alternative asset management industry is expected to price its 20.0 M share IPO between $14-$16.

      • Portillo's (Nasdaq: PTLO): The restaurant chain serving iconic Chicago street food through multichannel restaurants is expected to price its 20.3 M share IPO between $17-$20.

      • Runway Growth Finance (Nasdaq: RWAY): The specialty finance company focused on providing senior secured loans to high growth-potential companies is expected to price its 6.9 M share IPO between $14.60-$15.60.

      • Stronghold Digital Mining (Nasdaq: SDIG): The vertically integrated crypto asset mining company currently focused on mining Bitcoin is expected to price its 5.9 M share IPO between $16-$18.

      • The Vita Coco Company (Nasdaq: COCO): The creator of plant-based functional hydration platform, which pioneered packaged coconut water in 2004, is expected to price its 11.5 M share IPO between $18-$21.

      • Ventyx (Nasdaq: VYTX): The clinical-stage biopharmaceutical advancing new therapies for millions of patients living with inflammatory diseases and autoimmune disorders is expected to price its 7.8 M share IPO between $15-$17.

Gapping Up/Down

  • Gapping up:

    • VIH +3.5%, VXX +1.7%, USO +1.5%, TM +1.4%, XOM +0.7%, CVX +0.6%, SLB +0.6%, XLE +0.6%, HAL +0.5%, OIH +0.5%

  • Gapping down:

    • RVNC -32.4%, MNKD -28.7%, AVDL -22.8%, CABA -7%, IONS -6.4%, SPCE -3.1%, PHG -2%, UBER -1.2%, BIIB -1%

Analyst Research (see Upgrades/Downgrades calendar for full list):

  • Upgrades:

    • Adecoagro S.A. (AGRO) upgraded to Overweight from Equal-Weight at Morgan Stanley

    • Antero Resources (AR) upgraded to Buy from Neutral at Mizuho; tgt raised to $32

    • Argo Group (ARGO) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt $12

    • Beacon Roofing Supply (BECN) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt $63

    • Five9 (FIVN) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt $200

    • FMC Corp (FMC) upgraded to Buy from Hold at Loop Capital

    • Fortune Brands Home & Security (FBHS) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt lowered to $109

    • Hersha Hospitality Trust (HT) upgraded to Overweight from Equal Weight at Wells Fargo

    • Host Hotels (HST) upgraded to Equal Weight from Underweight at Wells Fargo; tgt $18

  • Downgrades:

    • Apple Hospitality REIT (APLE) downgraded to Underweight from Equal Weight at Wells Fargo

    • Avaya Holdings (AVYA) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $23

    • Chart Industries (GTLS) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $199

    • Con Edison (ED) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $68

    • Core Labs (CLB) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $32

    • Corteva (CTVA) downgraded to Hold from Buy at Loop Capital

    • Goosehead Insurance (GSHD) downgraded to Underperform from Neutral at BofA Securities; tgt $154

    • Walt Disney (DIS) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $175

  • Others:

    • a.k.a. Brands (AKA) initiated with a Buy at BofA Securities; tgt $13

    • a.k.a. Brands (AKA) initiated with a Buy at Truist; tgt $16

    • a.k.a. Brands (AKA) initiated with a Neutral at Credit Suisse; tgt $10

    • a.k.a. Brands (AKA) initiated with an Equal Weight at Wells Fargo; tgt $10

    • a.k.a. Brands (AKA) initiated with an Outperform at Cowen; tgt $11a.k.a. Brands (AKA) initiated with an Overweight at KeyBanc Capital Markets; tgt $13

    • a.k.a. Brands (AKA) initiated with an Overweight at Piper Sandler; tgt $13

    • Argo Blockchain Plc (ARBK) initiated with a Buy at Canaccord Genuity; tgt $24

    • Argo Blockchain Plc (ARBK) initiated with a Buy at Jefferies; tgt $30

    • Argo Blockchain Plc (ARBK) initiated with an Overweight at Barclays; tgt $22

    • atai Life Sciences N.V. (ATAI) initiated with a Buy at H.C. Wainwright; tgt $40

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