EUROPEAN EQUITY OPEN: Stocks open higher after heavy earnings docket; more central bank speak ahead

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  OVERNIGHT: US stocks finished higher although whipsawed as the focus centred on comments from Fed Chair Powell who provided a message for both hawks and doves (see here). In Asia, stocks were more mixed, while US President Biden's State of the Union Address did little to excite markets (see here). Recaps for both of these events can be found below.


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  EUROPEAN START: European equities begin the mid-week session on a constructive footing. This morning’s focus has been squarely on earnings: in the energy sector, TotalEnergies (TTE FP) and Equinor (EQNR NO) saw bumper profits in 2022. Many banks have reported this morning: SocGen’s (GLE FP) profits were hit as loan provisions were boosted, but ABN AMRO (ABN NA) reported more constructive numbers and announced a buyback. In the cyclicals sector, Volkswagen (VOW3 GY) prelim FY numbers were in line, but high inventories constrained net cash; the sector will also be cognizant of a report that suggests PHEVs may emit more carbon dioxide than standard lab tests. Meanwhile, industrial giant Airbus (AIR FP) has seen a soft start to deliveries in January. In materials, BHP (BHP LN) announced WAIO operations were suspended after a fatality, but Glencore (GLEN LN) announced Antapaccay mine in Peru had reopened. Ahead, the focus will be on a heavy amount of central bank speak across both sides of the Atlantic.

DAY AHEAD:

• Our live day ahead calendar can be accessed here; a PDF version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: The European data slate is thin, although commentary from ECB officials Knot (hawk) and Enria (who deals with supervision) is due. In EM, the National Bank of Poland is expected to hold rates at 6.75%, while the National Bank of Hungary’s January meeting minutes will be published.


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  NORTH AMERICAN DATA/SPEAKERS: US data releases for the day are thin, but there is a heavy slate of Fedspeak, which includes voters Williams, Waller, Barr, Cook, Kashkari and non-voter Bostic. For the BoC watchers, the central bank's meeting minutes are due for release (you can recap on the meeting in our central bank weekly here). Elsewhere, weekly US MBA mortgage applications data, and wholesale sales data for December will be released.


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  FIXED INCOME SUPPLY: From Europe, the UK will sell GBP 2bln in 2039 Gilts, while Germany will sell EUR 4bln of 2029 debt. The US will auction USD 35bln of 10yr notes; on Tuesday, the sale of 3yr notes which was judged as poor, marked by a 4bps tail and the lowest bid-to-cover since November 2021, with indirect participation notably falling off.


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  ENERGY: Weekly energy inventory data from the DoE is due in the US morning; for reference, the API data reportedly showed crude inventories -2.2mln (exp. +2.5mln), Cushing stocks +0.2mln; gasoline stocks +5.3mln (exp. +1.3mln), while distillate inventories +1.1mln (exp. +0.1mln).


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  CORPORATE EARNINGS: Today's major corporate earnings out of the US include CVS Health (CVS), Disney (DIS), Uber Technologies (UBER), Goodyear Tire (GT), Fox Corp. (FOX), Teva Pharmaceuticals (TEVA), Yum! Brands (YUM), Mattel (MAT), Coty (COTY), Under Armour (UAA). Our full daily earnings expectation sheet can be accessed here.


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  POWELL RECAP: Fed Chair Powell had a message for both the hawks and the doves; in his initial remarks, he reiterated the message from his post-meeting press conference last week, that the disinflationary process had begun but was at a very early stage and would be bumpy. He was encouraged that the process had begun without damaging the labour market. On the January jobs report, Powell said that the labour market was very strong, which he was not expecting, and added that if data were to continue to come in stronger than expected, the Fed would certainly raise rates more, adding that the jobs data showed why the Fed thinks returning inflation to target will be a process that will take a significant period of time. Powell emphasised again that the Fed probably needs to hike rates further as they have still not reached a sufficiently restrictive level. The Fed Chair concluded by stressing that if strong labour market continues, or higher inflation reports continue to be seen, the FOMC may need to hike more than what is priced in; his base case is that it will take some time to get inflation down, while the Fed will need to do more rate hikes, and then look to see if it is enough.


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  BIDEN SOTU RECAP: President Biden said he is announcing new standards to require all construction materials used in federal infrastructure projects to be made in America. He complained that the tax system was unfair, and called for Congress to pass a minimum billionaire tax and proposed to quadruple the tax on corporate stock buybacks. Biden said he was committed to working with China, but if China threatened US sovereignty, the US would act to protect the country, adding that the US was in the strongest position in decades to compete.

STOCK SPECIFIC NEWS:

• Our full European equity specific briefings for January 8th can be accessed here and here.


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  COMMUNICATIONS: Italy state lender CDP and Macquarie reportedly plan counter-offer for Telecom Italia (TIT IM) network worth around EUR 20bln.


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  CONSUMER CYCLICAL: Plug-in hybrid EVs (PHEVs) from BMW (BMW GY), Renault (RNO FP) and Stellantis’ (STLA IM/FP) Peugeot emit significantly more carbon dioxide than standard lab tests claimed, according to a Graz University study. Volkswagen (VOW3 GY) prelim FY results in line with expectations, net cash was below target dragged lower by high inventories. Barratt Development (BDEV LN) gave a H1 update and said the current outlook remained uncertain, buybacks to recommence. Pandora (PNDORA DC) noted uncertainties around organic sales growth. HelloFresh (HFG GY) downgraded at Credit Suisse. Volvo (VOLVB SS) downgraded at Jefferies.


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  ENERGY: TotalEnergies (TTE FP) saw record profits in 2022, confirms plan to spin off TotalEnergies EP Canada, and adds that French sites continue to be impacted by strike action. Equinor (EQNR NO) posts record profits in 2022, and boosts dividend. Aker Solutions (AKSO NO) Q4 revenue and EBITDA top expectations, sees higher revenues in 2023. Neste (NESTE FH) Q4 comps above estimates, proposes dividend of 1.02/shr.


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  FINANCIALS: SocGen (GLE FP) Q4 profits fell after it raised provisions for bad loans fivefold. ABN AMRO (ABN NA) Q4 profits beat expectations, and it announced a EUR 500mln buyback. Amundi (AMUN FP) Q4 flows rebounded, but AUMs declined in a 'difficult' market. Banco BPM (BAMI IM) Q4 profits topped expectations, and it lifted its dividend. Handelsbanken (SHBA SS) Q4 profits were in line, announced special dividend. Ashmore (ASHM LN) HY profits hit on cool risk appetite. Hannover Re (HNR1 GY) renewal rates nearly double in the quarter. Beazley (BEZ LN) Chair Roberts will stand down in Autumn 2022.


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  INDUSTRIALS: Airbus (AIR FP) January deliveries fell by one-third to 20 jets; Jeffries said it represents a soft start to the year. Maersk (MARSKB DC) Q4 profits and sales were short of expectations, and offered a wide outlook. Kone (KNEVB FH) downgraded at Exane BNP.


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  MATERIALS: BHP (BHP LN) announced a fatal incident at Port Hedland, and WAIO suspended operations for 24hrs. Glencore (GLEN LN) said Antapaccay copper mine in Peru has reopened after closing in January amid protesters attacks. Akzo Nobel (AKZA NA) Q4 sales were in line with consensus, sees higher profits in FY23 as raw material costs ease. Voestalpine (VOW AV) nine-month revenue rose 23% Y/Y/, raised FY22 EBITDA guidance.


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  TECH: Banco Sabadell (SAB SM) reportedly selected Nexi (NEXI IM) as the preferred bidder for its payments unit.


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  UTILITIES: E.ON SE (EOAN GY) 2022 results topped its guidance as non-core business performs well.

08 Feb 2023 - 08:10- Fixed IncomeData- Source: Newsquawk