US EARLY MORNING: Equity futures are trading lower, bonds are bid; Ukraine/Russia caution, China COVID resurgence ahead of Wednesday's FOMC

EQUITIES: APAC equities declined overnight, with losses pronounced in China where COVID cases jumped; the European day started defensively amid glacial progress in Russia/Ukraine talks, and after reports that Russia had taken the Kherson region, where a key Black Sea port is located. US equity futures are lower by 0.5-1.0% (NQ -0.5%, ES -0.6%, YM -0.7%, RTY -1.0%). The ‘hope’ theme is worth monitoring: US benchmarks were more resilient at the start of the conflict, underpinned by a view that the US had less exposure to Ukraine; Capital Economics notes that US equities Monday underperformed amid hopes of a geopolitical breakthrough, and said that "if meaningful progress is made, we think this underperformance could gather pace as the risk premium on rest-of-the-developed world equities unwinds and the 10-year TIPS yield gradually climbs further after its surge Monday".

TREASURIES: Treasury yields are lower by 3-4bps, with the rally most concentrated in the belly; major curve spreads are biased towards steepening by 1-2bps. There has been a gradual bid since the overnight session, with-some citing Ukraine/Russia slow progress, while others cite caution ahead of Wednesday’s FOMC–where a +25bps rate hike is expected (our preview here)– after yields Monday jumped, seeing 2yr yields rise to fresh multi-year highs on expectations the Fed would be aggressive in tackling inflation.

DOLLAR: The cautious risk set-up in the European morning has not resulted in any meaningful USD bid; in fact, the Greenback trades around three-tenths lower, with the DXY at 98.81. Overnight, USDJPY continued its march higher, supported by yield differentials and an unwind of haven premium; Japanese officials again said they were monitoring FX levels closely, but analysts do not foresee any intervention yet. The EUR continues to find support, rising back towards 1.10, amid hopes of peace on Monday, as well as ECB monetary policy, where the central bank will end bond buying in Q3; Commerzbank’s analysts told clients to sell Bund recoveries, noting that Monday’s sell-off in German debt was driven by the long-end. The SEK – which traders have used as a proxy for geopolitical sentiment – is up around two-tenths against the USD, but is trading lower by around the same margin vs the EUR. There isn’t a lot of joy in other G10 activity currencies, while EMFX is not exhibiting much strength either. China’s yuan weakened despite decent China activity data for January (backwards-looking), with the resurgence in COVID cases getting more attention; there is more chatter among market desks speculating about the PBOC continuing to loosen policy ahead, while HSBC told its clients that the Yuan's overvaluation and reduced yield advantage should weigh on the FX expectations and hedging behaviour of corporates and portfolio investors.

CRUDE: Major oil benchmarks are down by USD 5.50-6.00. The demand-side is being knocked by the resurgence of COVID in China, and some regional lockdowns. On the supply side, there is a feeling the Ukraine/Russia talks are moving towards de-escalation, although tangible progress remains to be seen, but Urals prices continue to slide amid the market 'self-sanctioning' purchases. On the Iran front, Russian Foreign Minister Lavrov (whose nation reportedly held up the nuclear talks on demands that it should gain sanctions exemptions with Iran as part of the deal) said an agreement on the revival of the Nuclear deal was on the "finishing straight".

EQUITY NEWS:

TECH:

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  Alphabet (GOOG) - Is changing prices for some storage, compute, and networking products (GOOG). Separately, Google Photos starts testing 'chips' for quickly interacting with text from images (Android Police)


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  Microsoft (MSFT) - Has begun testing promotions for some of its other products in the File Explorer app on devices running its latest Windows 11 Insider build. (Bleeping Computer)


• 
  Coupa Software Incorporated (COUP) - Dropped 28% in after hours as guidance disappointed expectations. Q4 adj. EPS 0.19 (exp. 0.05), Q4 revenue USD 193.3mln (exp. 185.7mln). Sees Q1 adj. EPS between 0.003-0.06 (exp. 0.05), and Q1 revenue seen at USD 190mln (exp. 196mln). Sees FY23 adjusted EPS between 0.15-0.19 (exp. 0.74), and sees FY23 revenue between USD 836-840mln (exp. 877.5mln). (COUP)


• 
  Softbank (SFTBY), Nvidia (NVDA) - Arm Ltd plans to cut up to 15% of its global workforce in wake of failed Nvidia takeover. (Telegraph)


• 
  Vimeo (VMEO) - Gained 2.5% after hours. Monthly revenue growth +23% Y/Y in February (vs +23% Y/Y in January). February subscriber growth +8% Y/Y (vs +26% last year); February ARPU +13% Y/Y (vs +27% last year). (VMEO)


• 
  EverCommerce (EVCM) - Slipped after hours after reporting a loss in Q4. Q4 EPS -0.02 (exp. 0.07), Q4 revenue USD 135.6mln (exp. 130.4mln). Sees Q1 revenue between USD 140.5mln (exp. 134.3mln), andadj. EBITDA expected between USD 21.5-22mln. FY22 revenue seen between USD 619-625mln (exp. 595.7mln). (EVCM)


• 
  GitLab (GTLB) - Rose 8.5% in after hours. Q4 EPS -0.16 (exp. -0.25), Q4 revenue USD 77.8mln (exp. 70.3mln). Is seeing continued strong momentum, broad-based growth. Sees Q1 loss per share of between 27-28c (exp. -0.30), and sees Q1 revenue around USD 77-78mln (exp. 73mln). FY23 loss per share seen between 0.97-1.02 (exp. -1.04), and sees FY23 revenue between USD 385.5-390.5mln (exp. 336.6mln). (GTLB)

COMMUNICATIONS:

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  Amazon (AMZN) - Amazon could be days away from closing its deal to buy MGM as a mid-March deadline for regulators to challenge the online retailer's merger plan approaches. (Reuters)


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  AT&T (T) - Sees an additional USD 2.5bln in cumulative cost savings over the next 2 years to reach its previously announced goal of USD 6bln in run-rate cost savings by the end of 2023. (T)

INDUSTRIALS:

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  Tesla (TSLA) - Hiked prices in China and the US on Tuesday for its second time in less than a week. (Reuters)


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  Boeing (BA), Air Transport Services Group (ATSG) - ATSG, the largest owner and operator of converted Boeing 767 aircraft, has placed a second order with Boeing for the conversion of four CAM-owned 767-300 aircraft into Boeing Converted Freighters (BCF), with an option for four additional conversions beyond that. (ATSG)


• 
  Nielsen Holdings PLC (NLSN) - Private-equity consortium, including Elliott, in talks to buy Nielsen for about USD 15bln including debt. (WSJ)


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  Volkswagen (VWAGY) - Brand returned to profitability in North America and achieved a 16% market share in China. Implemented a 10% cut in overheads since 2019. Sales limited by chip shortages. Continues to expect raw material prices to rise, expects volatility in commodities to last until 2026. (Reuters)


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  Porsche Automobil SE (POAHY) - Porsche and Bridgepoint are jointly acquiring US traffic-management solutions company Econolite Group, sum undisclosed. (MarketWatch)


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  SkyWest (SKYW), United Airlines (UAL) - US DOT barred SkyWest from ending service to 29 locales until replacement carriers can be found under the government's subsidy programme to provide air service to smaller communities. The 29 routes under the United Express name providing regional service for United Airlines. (Reuters)


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  Thales (THLLY), Safran (SAFRY) - The two will reportedly be the main beneficiaries of a military deal with Russia. (Reuters)

UTILITIES:

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  Southwest Gas Holdings (SWX) - Southwest Gas confirmed that Icahn Enterprises has revised its unsolicited offer to USD 82.50/share in cash; Southwest to review offer. (Barron's)


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  EDF (ECIFY) - UK mulls extending operation of its coal-fired power plants which are currently scheduled to begin closing in September; reportedly held talks with EDF over keeping sites such as West Burton open for longer. (City AM)

ENERGY:

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  Equinor (EQNR) - Confirms trading halt in Russian oil. (Reuters)

MATERIALS:

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  Rio Tinto (RIO) - Wants to buy out minority shareholders in Mongolian copper miner Turquoise Hill Resources for USD 2.7bln. (The Australian)


• 
  Olin Corporation (OLN) - Fell 2.6% after hours. Is temporarily curtailing integrated epoxy production at its Stade, Germany facility. Experienced weaker European epoxy resin demand than anticipated in Q1, exacerbated by uncertainty following the Russian invasion of Ukraine. Olin said it was unwilling to sell incremental volume into a poor-quality market, and said that operating the epoxy resin facility at less than 50% operating rates was impractical. (OLN)

CONSUMER CYCLICAL:

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  Yum China (YUMC) - Yum China says China's COVID curbs have impacted operations. (Reuters)


• 
  H&M (HNNMY) - Sales Growth Accelerates as Retailer Reduces Markdowns. Q1 revenue SEK 49.2bln (exp. 49.1bln). Group sales +18% Y/Y. (Bloomberg)


• 
  Vail Resorts (MTN) - Slipped in after hours. Q2 EPS 5.47 (exp. 5.68), Q2 revenue USD 906.5mln (exp. 954.9mln). Raised quarterly dividend to USD 1.91/shr. Revises FY22 Resort Reported EBITDA view to between USD 813-837mln. Will increase minimum wage to USD 20/hr. (MTN)


• 
  Wingstop (WING) - Fell 2.2% in after hours. CEO Charlie Morrison resigns, President/COO Michael Skipworth to succeed. (WING)


• CONSUMER STAPLES:


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  Imperial Brands (IMBBY) - Cuts FY net revenue growth outlook due to the hit from the exit of Russian assets. (Reuters)


• 
  Swedish Match (SWMAY) - Suspends preparation for cigar business IPO. (SWMAY)


• 
  Laureate Education (LAUR) - Increased in existing share repurchase program from USD 600mln to USD 650mln; has repurchased approximately USD 530mln under the authorisation to-date. (LAUR)

FINANCIALS:

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  European Banks - EU regulators rule out a blanket ban on bank dividend payouts and buybacks during the Ukrainian crisis, a more relaxed approach than what it took during the pandemic. Separately, Banks are reportedly on alert for a Russian reprisal cyber attacks on SWIFT. (FT)


• 
  Generali (ARZGY) - FY21 net EUR 2.85bln (prev. 1.74bln), Operating profit 5.85bln (prev. 5.21bln). GWP 75.8bln (prev. 70.7bln). Flags Ukraine Concerns in outlook. (MarketWatch)

HEALTH CARE:

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  Biogen (BIIB) - Biogen and Eisai amend collaboration agreements on Alzheimer’s disease treatments. (BIIB)


• 
  Exelixis (EXEL) - Fell over 3% in after hours. Does not intend to submit supplemental NDA to FDA for cabometyx. (EXEL)


• 
  Sanofi (SNY) - Announces EUR 300mln collaboration with Blackstone Life Sciences to advance an innovative treatment for multiple myeloma. (RTT)


• 
  Guardant Health (GH) - Japan grants regulatory approval of Guardant360® CDx in patients with advanced solid tumours. (GH)

REAL ESTATE:

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  Blackstone (BX), Brookfield (BAM) - Blackstone and Brookfield acquire 49% stake in One Manhattan West in deal valued at USD 2.85bln. (BX)


• 
  Texas Pacific Land Trust (TPL) - Announced USD 100mln stock buyback. (TPL)

15 Mar 2022 - 09:39- EquitiesResearch Sheet- Source: Newswires