US EARLY MORNING: Equity futures are gaining ahead of the key FOMC announcement later today

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  EQUITIES: US equity futures are higher by 1.0-1.8%, with the Nasdaq-100 leading gains. The upside in these index futures takes the S&P 500, Dow and Russell mini contracts positive for the week, just, while the Nasdaq is a touch lower. There doesn’t appear to be a single catalyst for the upside, however, some notable analysts – like JPMorgan’s Kolanovic – have suggested that the recent drops seemed overdone. The narrative is, of course, slave to events on Constitution Avenue, with the Fed rate decision out later today, where the central bank will likely signal the start of the hiking cycle in March. There is also geopolitics with the power to influence how equities fare in the weeks ahead, while corporate earnings will also inform the risk tone. On the note of the latter, Microsoft’s earnings release after hours Tuesday was curious in that shares initially slipped by around 5% upon the release, despite top- and bottom-line beats and decent internals; that downside was completely wiped, however, as the tech giant issued decent guidance; analysts said the tape action highlights the jittery nature of attitudes towards tech, with the complex likely to be one of those hit hardest by a rate hike cycle, given higher rates reduces the present value of future income.


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  BONDS: Treasury yields aren’t more than ~1bps away from neutral, with a very mild flattening bias. While the Fed is expected to allude to tighter policy ahead – money markets are discounting four rate hikes this year – the tone of the central bank, specifically how hawkish it will sound, will likely be the key catalyst in the sessions ahead. Areas of focus will be: lift-off timing, the eventual terminal rate expectation; the pace of tapering, balance sheet tightening plans. A link to our preview is in the Day Ahead section below.


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  DOLLAR: The Dollar Index is trading fractionally higher, above 96.00. However, it is the yuan that has garnered much attention this morning, with the Chinese central bank setting the USD/CNY md-point at the lowest in four years (strongest yuan fixing in four years). A Reuters commentary notes that the yuan is increasingly behaving like a reserve currency (the trade-weighted yuan is at multi-year highs already), seeing inflows during episodes of risk-off, which is coming in spite of the decline in Chinese government bond yields. The yuan strength isn't weighing on exports just yet, which may give us some insight into why authorities haven't been panicked into weakening the currency. Elsewhere, high beta FX in G10 is mixed, with the CAD, AUD higher (central banks today and next week, respectively - may tilt hawkish), while the GBP is flat amid PM Johnson's political woes. EMFX is mixed, with TRY unable to take advantage of the risk-friendly conditions, likely as oil prices perk up again, although the risk-sensitive ZAR is higher. Naturally, the entire complex is going to be focussing on today's Fed.


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  CRUDE: Major crude benchmarks are 50-60c higher. The API reported a slightly deeper than expected drawdown in weekly crude stocks, distillates saw a larger than expected draw, while the gasoline build was a little lower than the street was expecting. Geopolitics and tight capacity continue to be the driving catalysts, while a decent risk tone is also assisting.

DAY AHEAD 25TH JAN:

• 10:30GMT/05:30EST: Germany 10-Year Bund Auction (preview)


• 11:00GMT/06:00EST: Anthem Inc (ANTM) earnings (preview)


• 11:00GMT/06:00EST: France Benefit Claims, Jobseekers (DEC)


• 11:30GMT/06:30EST: AT&T Inc (T) earnings (preview)


• 12:00GMT/07:00EST: Brazil IPCA mid-month CPI (JAN)


• 12:00GMT/07:00EST: Mexico Retail Sales (NOV)


• 12:30GMT/07:30EST: Boeing Co (BA) earnings (preview)


• 12:00GMT/07:00EST: US MBA Mortgage Applications (21/JAN)


• 12:30GMT/07:30EST: Abbott Laboratories (ABT) earnings (preview)


• 12:30GMT/07:30EST: Brazil Current Account (DEC)


• 12:30GMT/07:30EST: Brazil Foreign Direct Investment (DEC)


• 13:30GMT/08:30EST: CA Wholesale Sales (DEC)


• 13:30GMT/08:30EST: US Retail Inventories Ex Autos Adv (DEC)


• 13:30GMT/08:30EST: US Goods Trade Balance Adv (DEC)


• 13:30GMT/08:30EST: US Wholesale Inventories Adv (DEC)


• 15:00GMT/10:00EST: CA BoC Rate Decision (preview)


• 15:00GMT/10:00EST: US New Home Sales (DEC)


• 15:30GMT/10:30EST: US EIA Energy Inventories (21/JAN)


• 16:00GMT/11:00EST: Russia PPI (DEC)


• 16:30GMT/11:30EST: US 2-Year FRN Auction


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  19:00GMT/14:00EST: US FOMC Rate Decision (preview)
  


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  19:30GMT/14:30EST: US Fed Chair Powell Press Conference (preview)
  


• 21:00GMT/16:00EST: Intel Corp (INTC) earnings (preview)


• 21:00GMT/16:00EST: South Korea Business Confidence (JAN)


• 21:10GMT/16:10EST: Tesla Inc (TSLA) earnings (preview)


• 21:10GMT/16:10EST: ServiceNow Inc (NOW) earnings (preview)

ECONOMY:

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  WASHINGTON: US President Biden will host CEOs from Ford (F), GM (GM), Microsoft (MSFT), Siemens (SIE), Corning (GLW), and others at the White House on Wednesday to promote his stalled Build Back Better bill (CNBC). House Speaker Pelosi, 81, will seek a 19th term in Congress (Daily Mail).


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  FED BOARD: US Senate will hold hearings for Sarah Bloom Raskin, Lisa Cook and Philip Jefferson nominations to the Fed board on February 3rd. GOP Senator Toomey raised concerns over Fed nominees' lack of diversity, while oil groups were reported to prepare letters in opposition to Raskin's nomination. (Senate Banking Committee)


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  CHINA PROPERTY: Offshore bondholders of indebted Chinese property developer Evergrande did not receive dollar coupon payments on Monday; Evergrande to hold investor call with advisers today (Reuters)


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  PBOC: China's central bank injected CNY 200bln via 14-day reverse repos with the rate at 2.25% for a CNY 100bln net injection. (Newsquawk)


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  ECB: ECB's Simkus said that the inflation outlook was no reason for the central bank to change the path of policy, sees no evidence of significant change to the forecasts. Russian related tensions are a bigger cause for uncertainty than Omicron. (Bloomberg)


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  BOJ: Summary of Opinions from January meeting stated consumer inflation is likely to gradually accelerate as more firms pass on costs to households and the output gap improves but noted that it's hard to achieve BoJ's price target by end of fiscal 2023. Furthermore, it stated that consumer inflation may temporarily approach 2% from April onwards although key is whether the economy has momentum for such a move to be sustainable, while it reiterated the BoJ must take additional easing steps as needed and it is appropriate to maintain current forward guidance on interest rates and monetary base commitment. (Newsquawk)

GEOPOLITICS:

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  US/RUSSIA: President Biden said the US could sanction Russian President Putin personally if Russia invaded Ukraine, reiterating that there would be "enormous consequences" (BBC). The State Department has not seen any signs of Russian de-escalation towards Ukraine; does not rule out adding further troops to the already 8,500 on alert (Fox).


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  US/CHINA: US House leaders unveiled a bill aimed at increasing US competitiveness with China and supporting the US chip industry, including USD 52bln to subsidise semiconductor manufacturing and research (Reuters). Elsewhere, China needs to be prepared to deal with carious risks and challenges on the Taiwan issue (Xinhua).


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  BREXIT: EU Brexit negotiator Sefcovic told member states there is no prospect of an imminent breakthrough in NI Protocol negotiations. (RTE)

EQUITY NEWS:

TECH:

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  Microsoft (MSFT) - Initially declined after publishing Q2 earnings, despite posting top- and bottom-line beats; but losses were wiped after the company later issued guidance on call. Q2 EPS 2.48 (exp. 2.31), Revenue 51.73bln (exp. 50.88bln). Revenues from its Intelligent Cloud, More Personal Computing, and its Productivity And Business Processes segments all topped expectations. Guides Q3 revenues a little above the street's forecasts. (Newsquawk)


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  Microsoft (MSFT), Activision (ATVI), Sony (SONY) - Microsoft to honour agreements struck before the MSFT/ATVI deal, next three Call of Duty games will be made available on Sony's PlayStation, but MSFT could eventually deprive Sony of the franchise (Bloomberg). Separately, Microsoft said Halo Infinite had 20mln players, the biggest launch in the Halo franchise history (MSFT). Elsewhere, Activision did not respond to workers' request for recognition of a union. (WaPo)


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  Amazon (AMZN) - Reportedly halts 'pay to quit' offer, where some warehouse staff were paid up to USD 5,000 to quit after the busy peak season. (Information)


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  Alphabet (GOOG) - Judge rejects Google request to dismiss location-privacy suit, says it must face lawsuit in Arizona. (NY Post)


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  Texas Instruments (TXN) - Top- and bottom-line beats in Q4. EPS 2.27 (exp. 1.94), Revenue 4.83bln (exp. 4.43bln). Guides Q1 EPS between USD 2.01-2.29 (exp. 1.90), and sees revenue between USD 4.5bln-4.9bln (exp. 4.4bln). Said lead times were stable, while inventories remained below desired levels. (Newsquawk)


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  Toshiba (TOSYY) - Suspended operations at a semiconductor plant located in Japan has now partially restarted. (Reuters)


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  F5 Networks (FFIV) - Q1 EPS 2.89 (exp. 2.78), revenue 687mln (exp. 676mln). Despite strong demand for software solutions (+47% Y/Y), FFIV said its ability to meet customer demand will be restricted by supply chain constraints for the remainder of FY22. Cut guidance, now sees FY22 revenue +4.5-8% (prev. +8-9%). (FFIV)

COMMUNICATIONS:

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  Disney (DIS) - Announced "Percy Jackson and the Olympians" show. (Variety)


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  DoorDash (DASH) - Netflix (NFLX) COO/CPO elected to DoorDash board, effective January 19. (DASH)

CRYPTO:

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  Meta Platforms (FB) - Cryptocurrency initiative 'Diem Association' (formerly 'Libra') weighs sale of its assets to return capital to its investor members, unraveling after regulatory pressure. (Bloomberg)


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  Financial Institutions (FISI) - FISI's Five Star Bank announced partnership with bitcoin company NYDIG. (FISI)

FINANCIALS:

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  Citigroup's (C) - HSBC (HSBC) assessing a purchase of Citi's Mexican retail unit Citibanamex; could fetch USD 4-8bln, analysts say. (Reuters)


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  Robinhood Markets (HOOD) - Said it remains in a strong position to support clients through unlikely market events. (HOOD)


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  Capital One Financial Corp (COF) - Profits declined, but revenue grew. EPS 5.41 (exp. 5.30), Revenue 8.1bln (exp. 7.93bln). (Newsquawk)


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  Premier Financial (PFC) - Q4 EPS light (0.69 vs exp. 0.76), but boosted share buyback to 2mln shares, and raised dividend +7% to 0.30/shr. (PFC)


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  UMB Financial Corporation (UMBF) - Q4 EPS 1.62 (exp. 1.85), NII 210.6mln (prev. 194.7mln Y/Y). Said it was positioned to benefit from anticipated economic expansion, higher interest rates. (UMBF)


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  Navient Corporation (NAVI) - Q4 core EPS 0.78 (exp. 0.86), revenue 189mln (exp. 282mln). (NAVI)

HEALTH CARE:

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  Gilead (GILD) - FDA placed a partial clinical hold on studies evaluating the combination of magrolimab plus azacitidine. (GILD)

MATERIALS:

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  Fresnillo (FNLPF) - Quarterly gold production -12.9% vs Q3, silver production +2.1% vs Q3. 2022 gold production expected 600-650koz. (Fresnillo)


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  Wacker Chemie (WKCMY) - FY21 revenue EUR 6.20bln (prev. EUR 4.9bln). EBIT EUR 1.09bln (prev. EUR 263mln). Net EUR 780mln (prev. EUR 202mln). Said demand remained high into 2022. (MarketWatch)

INDUSTRIALS:

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  Boeing (BA) - In advanced discussions with Qatar Airways to launch a new 777x freighter as early as next week. (Reuters)


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  Airbus (EADSY) - Logged 419 gross helicopter orders, which the company said showed signs of a recovery. (Newsquawk)


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  AUTOS - UK body says humans are classified as a "user in charge" in self-driving cars, meaning if something went wrong, auto manufacturers could be held accountable; urges rules. (Reuters)


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  Canadian National Railway Company (CNI) - Settles dispute with activist TCI, names Tracy Robinson as new CEO, commits to appointing two new independent directors; perhaps a sign that adventurous M&A is not on the horizon after last yeat's failed bid to acquire Kansas City Southern (KSU). (Bloomberg)


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  Dassault Aviation (DASTY) - Indonesia reportedly moving ahead with plan to purchase 36 Rafale fighters. (EurAsian Times)


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  Deutsche Lufthansa (DLAKY) - Could acquire ITA Airways stake in 2023/2024 after ITA privatisation and government approval. (Newsquawk)


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  Ferrovial (FRRVY) - Aeropuertos attempting to attain new airport concessions in the US. (Newsquawk)


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  Telecom Italia (TIIAY) - To assess a plan to revamp during meeting on Wednesday; final approval expected early-March. Not expected to take a stance on KKR. (Rtrs)

ENERGY:

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  INVENTORIES: API crude stocks -0.9mln in the week (exp. -0.7mln), Cushing -1.0mln, gasoline +2.4mln (exp. +2.5mln), distillates -2.2mln (exp. -1.3mln).


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  Shell (RDS.A), Phillips 66 (PSX) - US DoE approved 13.4mln barrels loan from the SPR, second-largest ever, to stem oil price upside; Shell, Trafigura, Phillips 66 among largest recipients. (Bloomberg)


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  Exxon Mobil (XOM) - Plans to start production at second oil platform in Guyana next month, source said. (Reuters)


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  Energy Transfer (ET) - Hiked dividend +15% to USD 0.175/shr. (ET)


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  Tullow Oil (TUWOY) - FY revenue seen around USD 1.3bln with realised oil price of USD 63/bbl. (Reuters)

CONSUMER CYCLICAL:

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  Playtech (PYTCY) - Preparing contingency plans including breakup/sale if proposed GBP 2.7bln Aristocrat takeover fails. Reiterates recommendation for holders to vote in favour. (Sky)


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  Faurecia (FAURY) - EU Commission approved takeover of Hella (HLLGY), all conditions satisfied. (Faurecia)


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  Silgan Holdings (SLGN) - Q4 EPS 0.79 (exp. 0.73), revenue 1.44bln (exp. 1.4bln). Sees Q1 EPS 0.70c-0.80 (exp. 0.84). Said decrease in volume in the Metal Container segment is due to customer purchases at the end of 2021 in advance of significant raw material inflation. (SLGN)

REAL ESTATE:

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  Boston Properties (BXP) - Q4 FFO 1.55 (exp. 1.52), revenue 731mln (exp. 727mln). Sees Q1 EPS between 0.67-0.69 (exp. 0.57), and sees Q1 FFO/shr between 1.72-1.74 (exp. 1.73). (BXP)

26 Jan 2022 - 09:57- EquitiesResearch Sheet- Source: Newsquawk