MORNING NEWS CALL

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U.S. Edlllon Fttday. July 7. 2023

TOP NEWS
• Slower, still strong US job growth expected in June
U.S. growth likely slowed in June after surging in the prior two months, but labor market conditions remain tight,
with the unemployment rate expected to have retreated from a seven-month high and fairly strong wage gains
persisting.

• Tesla offers new China rebate as price cuts rock EV market

Tesla offered a new incentive to boost electric vehicle sales in China as it notified some workers making battery
packs at its Shanghai complex of layoffs, according to a company announcement and a worker who had received
the notice.

• Yellen criticizes China's 'punitive' actions against US companies, urges market reforms
U.S. Treasury Secretary Janet Yellen called for market reforms in China and criticized the world's second-largest
economy for its recent harsh actions against U.S. companies and new export controls on some critical minerals.

• US FDA grants standard approval of Eisai/Biogen Alzheimer's drug

Eisai and Biogen's Leqembi won a coveted standard approval nod from the U.S. Food and Drug Administration on
Thursday, the first Alzheimer's treatment to achieve that goal, clearing the way for wider insurance coverage of the
drug.

• Biden's junk fee crusade turns to short-term health insurance plans

President Joe Biden on Friday will announce new steps to crack down on short-term health insurance plans and
surprise medical bills, stepping up his war against so-called junk fees to lower healthcare costs.

BEFORE THE BELL

Wall Street futures slipped, while European shares were little changed as investors remained on edge ahead of
the key U.S. jobs report due later in the day, which could lead the Federal Reserve to resume raising interest rates
this month after a pause in June. In Asian equity markets, Chinese stocks ended lower, dragged down by
semiconductor companies, while Japan's Nikkei closed in the red on Fed tightening concerns. The dollar fell
sharply against the yen which got a lift from the Japanese wage data. Gold prices edged up, but were on track for
a fourth consecutive weekly loss. Oil prices rose as resilient demand resulted in a larger-than-expected fall in U.S.
oil stockpiles.

STOCKS TO WATCH

Results
• Levi Strauss & Co: The company cut its annual profit forecast on Thursday, in a sign that higher costs were
weighing on the denim clothing maker's margins as it struggles with falling sales at its wholesale channels in North
America. Levi’s net revenues for the second quarter that ended May 28 declined by 9%, its steepest quarterly drop
since the first quarter of 2021. Levi's now expects adjusted profit to be between $1.10 and $1.20 per share for
2023, compared to its prior forecast of $1.30 to $1.40. The annual reported net revenue is expected to increase
1.5% to 2.5% from a year earlier, the apparel maker said, narrowing its previous forecast range of 1.5% to 3%.

In Other News
• AbbVie Inc: The company cut its full-year profit forecast on Thursday, citing $280 million in milestone and in-
process research and development expenses during the second quarter. The company now expects adjusted
profit between $10.57 and $10.97 per share, compared with $10.72 to $11.12 it previously expected. AbbVie also

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trimmed adjusted profit for the second quarter by $0.15 per share and expects to post adjusted profit of $2.75 to
$2.85 per share. The company is scheduled to report second-quarter results on July 27.

• Alibaba Group Holdings Ltd: The company along with Huawei Technologies showcased new products,
including an artificial intelligence (AI) image generator and an AI model upgrade, as Chinese companies jostle for
position in the global AI race. Alibaba Cloud, an Alibaba subsidiary, presented at the World Artificial Intelligence
Conference in Shanghai an image generator named Tongyi Wanxiang that will initially be available to enterprise
customers in beta form. Huawei demonstrated the third iteration of its Panggu AI model at the start of its three-day
annual developer conference in Dongguan. Alibaba's image generator will compete with DALL-E and Midjourney,
U.S.-based rivals that have gained a large following worldwide.

• Alphabet Inc, Meta Platforms Inc & Uber Technologies Inc: The Biden administration on Thursday asked a
federal appeals court for an emergency order halting a lower court ruling that bars some government agencies and
officials from meeting and communicating with social media companies about moderating their content. In a filing
with the New Orleans-based 5th U.S. Circuit Court of Appeals, the administration said the lower court ruling was
"both sweeping in scope and vague in its terms," and likely to be overturned on appeal. The social media
companies mentioned in the lawsuit include Facebook and Instagram parent Meta Platforms, Twitter and
Alphabet's YouTube. Separately, PwC Australia advised Uber and Facebook how to restructure in face of an
Australian law clamping down on tax avoidance, but both companies said they were surprised to find out PwC's
advice may have been based on leaked government plans.

• Biogen Inc: Eisai and Biogen's Leqembi won a coveted standard approval nod from the U.S. Food and Drug
Administration on Thursday, the first Alzheimer's treatment to achieve that goal, clearing the way for wider
insurance coverage of the drug. The FDA decision marks a new milestone for a fatal disease that has eluded
drugmakers' efforts for decades. Trial data showed that the treatment slows progression of the brain-wasting
disease by 27% for patients in the earliest stages of Alzheimer's. Leqembi is an antibody designed to remove
sticky deposits of a protein called amyloid beta from the brains of Alzheimer's patients.

• Broadcom Inc: The U.S. chipmaker will invest in a European Union-funded programme to develop a
semiconductor industry in Spain, Chief Executive Charlie Kawwas said late on Thursday. The project in which
Broadcom would be involved could be worth $1 billion, the Spanish economy ministry said in an emailed
statement. Broadcom did not say how much it would invest. The project would include the construction of "large-
scale back-end semiconductors facilities unique in Europe", the ministry said, adding no location had been picked
yet. The Spanish government has said it would allocate as much as 12 billion euros from the European Union's
pandemic relief funds it is set to receive to subsidise the development of the semiconductor industry.

• Equinor ASA: The Norwegian refiner has paused production at its Oseberg East oil field in the North Sea due to
staffing shortages, it said. "We have temporarily shut down the field because of unplanned absences and illness
from personnel with roles that are critical for production," a company spokesperson said. "We are working on
replacements and expect to be back in operation shortly." The spokesperson said the platform, the smallest in the
Oseberg area, was shut down at 1500 GMT on Thursday. Oseberg East is at the tail end of its production phase,
according to operator Equinor and the Norwegian Petroleum Directorate.

• Hudbay Minerals Inc: In an interview with Reuters, the company's CEO Peter Kukielski said will entertain
acquisition offers provided price is right, otherwise companies are "wasting" their time. Kukielski said there is a
potential for some of the mid-size copper companies to come together to create one mega copper company. "I
would certainly like to put them together," he said. For Hudbay the aim is to triple its copper production by the end
of the decade, which it is planning to achieve through mergers or acquisitions and not by organic growth.

• KKR & Co Inc & Telefonica SA: The company has sold a 54% stake in its fibre optic network in Peru to U.S.
private equity fund KKR and 10% to Entel's local business, the Spanish telecoms group said, adding that it will
retain the remaining 36%. Over the past few years, Telefonica has carried out a series of asset sales to reduce
debt and to help fund the hefty investment required to build 5G mobile networks. The Spanish company did not
disclose the value of the transaction but said the deal would cut its debt by 200 million euros. The transaction
valued 100% of the unit at about 550 million euros, including debt, according to a banking source close to the deal.
The new company, Pangeaco, will combine the existing fibre optic network in Peru from Telefonica and Entel, KKR
firm said in a separate statement.

• McDonalds's Corp: Restaurants of the fast food chain have dropped tomatoes from their burgers and wraps in
many parts of India, hit by supply shortages and quality concerns after prices of the vegetable soared to records.
In some regions, wholesale prices of the staple of traditional Indian cuisine have surged 288% in a month to a high
of 140 rupees a kg, with retail prices still higher, spurring many people to cut back on consumption. In a statement

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to media, Connaught Plaza Restaurants, which runs about 150 outlets as McDonald's franchisee in India's north
and east, attributed the decision to "temporary" seasonal issues. However, Westlife Foodworld, the McDonald's
franchisee for India's western and southern regions, with 357 restaurants, said there were "no serious tomato-
related issues".

• Nikola Corp: The electric-truck maker on Thursday adjourned its annual shareholder meeting for the second
time this year, as it could not muster sufficient votes for a proposal to increase the number of outstanding shares.
The Arizona-based company pushed its shareholder meeting thrice last year as it struggled to garner investor
approval for a similar proposal. A higher number of outstanding shares would allow the company to issue equity in
a bid to raise funds. Under the proposed new law, the voting threshold for approval to increase the number of
shares would change from majority of outstanding stock to majority of shares voting on the proposal, smoothening
the way for Nikola to get support for its proposal.

• Novo Nordisk A/S: The firm accused three Florida pharmacies of illegally selling products claiming to contain
semaglutide, the active ingredient in the Danish drugmaker's weight loss and diabetes drugs Wegovy, Ozempic
and Rybelsus. In three separate lawsuits in Florida federal court, Novo Nordisk sought orders barring TruLife
Pharmacy, Brooksville Pharmaceuticals and WellHealth Inc from selling the products, and seeking unspecified
money damages. The three defendants are compounding pharmacies, which make custom drug preparations for
customers. Novo Nordisk said in the lawsuits that selling drugs without going through the FDA approval process
gave the pharmacies an "unfair competitive advantage."

• Shell Plc: The energy giant expects second-quarter gas trading results to be "significantly lower" than in the
previous quarter, it said. In an update ahead of second-quarter results on July 27, the world's biggest liquefied
natural gas (LNG) trader also flagged $3 billion in writedowns for the quarter, primarily driven by a 1% increase in
the discount rate used for impairment testing. It added that trading performance in its chemicals and products
business was also expected be lower than in the first quarter, with the indicative refining margin forecast to drop to
$9 a barrel from $15 a barrel. U.S. rival Exxon also guided for lower refining margins this week.

• Starbucks Corp: The National Labor Relations Board on Thursday sued the company over the coffee chain's
refusal to rehire 33 workers as it reorganized three downtown Seattle stores, including its flagship store in Pike
Place Market. In a petition filed in Seattle federal court, the agency called Starbucks' plan to reorganize the stores
into a "Heritage District," and force 73 workers to reapply for their jobs, an illegal response to unionization efforts at
one of the stores, at 1st Avenue and Pike Street. Starbucks defended its actions, and said workers at the stores
can seek to unionize through an NLRB-supervised election.

• Suncor Energy Inc: The Canadian energy firm on Thursday said that due to a cyber security incident on June
21, unauthorized party obtained Petro-Points members' basic contact information. It added that its Petro-Canada
retail and wholesale distribution business experienced temporary disruptions that have largely been resolved.
Petro-Points is a loyalty program. The company noted that the cyber security incident has not impacted the safety
and reliability of its field operations.

• Tesla Inc: The company offered a new incentive to boost electric vehicle sales in China as it notified some
workers making battery packs at its Shanghai complex of layoffs, according to a company announcement and a
worker who had received the notice. Tesla announced the cash rebate offer on new cars a day after joining 15
other companies, including Chinese EV makers Nio, Li Auto and Xpeng, in a pledge to avoid "abnormal pricing",
interpreted by some to signal a truce in a price war that has threatened industry-wide profitability. Tesla said it
would offer new buyers of its Model Y and Model 3 vehicles a cash rebate of 3,500 yuan if they could cite a referral
from an existing owner. Separately, workers in Tesla's Shanghai complex assembling battery packs were informed
of layoffs, according to a worker who had received the notice.

• Warner Bros Discovery Inc: The studio on Thursday said a map in its upcoming "Barbie" movie of the South
China Sea is a "child-like" drawing with no intended significance, days after Vietnam said it would ban the film over
the map. Vietnam balked at a scene of the map that shows China's unilaterally claimed territory in the South China
Sea, state media reported on Monday. It decided to ban domestic distribution of the highly anticipated film starring
Margot Robbie and Ryan Gosling. "Barbie" is the latest movie to be banned in Vietnam for depicting China's nine-
dash line, which was repudiated in an international arbitration ruling by a court in The Hague in 2016. China
refuses to recognize the ruling.

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ANALYSIS
Will abandoning American help JetBlue's Spirit merger? Not by much
JetBlue Airways' decision to abandon its alliance with American Airlines has improved its chances in the trial over
a $3.8 billion deal to buy Spirit Airlines, but may not be enough to hand it a victory, antitrust experts said.

ANALYSTS' RECOMMENDATION
• Ford Motor Co: Jefferies raises target price to $17 from $16, expecting Q2 to demonstrate progress in closing
the gap to peers on Blue and take Pro sustainably to double-digit margins.

• Kimbell Royalty Partners LP: Raymond James cuts target price to $20 from $21, based on weaker commodity
prices.

• Kontoor Brands Inc: Barclays cuts target price to $41 from $45, driven by a significant reduction in U.S.
wholesale and a worsening pricing environment.

• Quest Diagnostics Inc: Baird raises target price to $149 from $146, after the company confirmed margin outlook
at June investor conference and signaled a strong seasonal 2Q pattern.

• Union Pacific Corp: RBC raises target price to $193 from $184, awaiting the board decision on the company's
next CEO.

ECONOMIC EVENTS (All timings in U.S. Eastern Time)

0830 Nonfarm payrolls for June: Expected 225,000; Prior 339,000
0830 Private payrolls for June: Expected 200,000; Prior 283,000
0830 Manufacturing payrolls for June: Expected 0; Prior -2,000
0830 Government payrolls for June: Prior 56,000
0830 Unemployment rate for June: Expected 3.6%; Prior 3.7%
0830 Average earnings mm for June: Expected 0.3%; Prior 0.3%
0830 Average earnings yy for June: Expected 4.2%; Prior 4.3%
0830 Average workweek hours for June: Expected 34.3 hrs; Prior 34.3 hrs
0830 Labor force participation for June: Prior 62.6%
0830 U6 underemployment for June: Prior 6.7%

CORPORATE EVENTS (All timings in U.S. Eastern Time)

0900 E2open Parent Holdings Inc: Annual Shareholders Meeting

EX-DIVIDENDS
AT&T Inc: Amount $0.27
Brady Corp: Amount $0.23
Darden Restaurants Inc: Amount $1.31
General Mills Inc: Amount $0.59
Intuit Inc: Amount $0.78
Lincoln National Corp: Amount $0.45
McCormick & Company Inc: Amount $0.39
Micron Technology Inc: Amount $0.11
OGE Energy Corp: Amount $0.41
UDR Inc: Amount $0.42
Universal Corp: Amount $0.80
Verizon Communications Inc: Amount $0.65

(All analysts' estimates are according to I/B/E/S Refinitiv data)

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